0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2024-03-31 0000763901 bpop:PrGovernmentDirectExposureMember us-gaap:LoansMember 2023-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialAndIndustrialLoansMember 2023-03-31
1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
10-Q
[X]
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended
March 31, 2024
or
[ ]
Commission File Number:
001-34084
POPULAR, INC.
(Exact name of registrant as specified in its charter)
Puerto Rico
66-0667416
(State or other jurisdiction of Incorporation or
(IRS Employer Identification Number)
organization)
Popular Center Building
209 Muñoz Rivera Avenue
Hato Rey
,
Puerto Rico
00918
(Address of principal executive offices)
(Zip code)
(
787
)
765-9800
(Registrant’s telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which
registered
Common Stock ($0.01 par value)
BPOP
The
NASDAQ Stock Market
6.125% Cumulative Monthly Income Trust
Preferred Securities
BPOPM
The
NASDAQ Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X]
Yes
[ ] No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit such files).
[X]
Yes
[ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated
filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
Accelerated filer [ ]
Non-accelerated filer [ ]
Smaller reporting company
[ ]
Emerging growth company
[ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes
[X]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest
practicable date: Common Stock, $0.01 par value,
72,271,778
2
POPULAR, INC.
INDEX
Part I – Financial Information
Page
Item 1. Financial Statements
Unaudited Consolidated Statements of Financial Condition at March 31, 2024 and
December 31, 2023
6
Unaudited Consolidated Statements of Operations for the quarters
ended March 31, 2024 and 2023
7
Unaudited Consolidated Statements of Comprehensive (Loss) Income for the
quarters ended March 31, 2024 and 2023
8
Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the
quarters ended March 31, 2024 and 2023
9
Unaudited Consolidated Statements of Cash Flows for the quarters
ended March 31, 2024 and 2023
11
Notes to Unaudited Consolidated Financial Statements
13
Item 2. Management’s Discussion and Analysis of Financial Condition and
114
Item 3. Quantitative and Qualitative Disclosures about Market Risk
158
Item 4. Controls and Procedures
158
Part II – Other Information
Item 1. Legal Proceedings
159
Item 1A. Risk Factors
159
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
159
Item 3. Defaults Upon Senior Securities
160
Item 4. Mine Safety Disclosures
160
Item 5. Other information
160
Item 6. Exhibits
161
Signatures
3
Forward-Looking Statements
This Form 10-Q contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of
1995, including, without limitation, statements about Popular, Inc.’s (the “Corporation,” “Popular,” “we,” “us,” “our”) business,
financial condition, results of operations, plans, objectives and future performance. These statements are not guarantees of future
performance, are based on management’s current expectations and, by their nature, involve risks, uncertainties, estimates and
assumptions. Potential factors, some of which are beyond the Corporation’s control, could cause actual results to differ materially
from those expressed in, or implied by, such forward-looking statements. Risks and uncertainties include without limitation the effect
of competitive and economic factors, and our reaction to those factors, the adequacy of the allowance for loan losses, delinquency
trends, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity, and the effect
of legal and regulatory proceedings and new accounting standards on the Corporation’s financial condition and results of operations.
All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,”
“continues,” “expect,” “estimate,” “intend,” “project” and similar expressions and future or conditional verbs such as “will,” “would,”
“should,” “could,” “might,” “can,” “may” or similar expressions are generally intended to identify forward-looking statements.
Various factors, some of which are beyond Popular’s control, could cause actual results to differ materially from those expressed in,
or implied by, such forward-looking statements. Factors that might cause such a difference include, but are not limited to:
●
conditions in the geographic areas we serve and, in particular, in the Commonwealth of Puerto Rico (the
“Commonwealth” or “Puerto Rico”), where a significant portion of our business is concentrated;
●
consumer confidence and spending habits which may affect in turn, among other things, our level of non-performing
assets, charge-offs and provision expense;
●
originations, affect our ability to originate and distribute financial products in the primary and secondary markets and
impact the value of our investment portfolio and our ability to return capital to our shareholders;
●
banking industry in general on investor and depositor sentiment regarding the stability and liquidity of banks;
●
Puerto Rico Government and the Federally-appointed oversight board on the economy, our customers and our
business;
●
Economic Stability Act (“PROMESA”) and of other actions taken or to be taken to address Puerto Rico’s fiscal
challenges on the value of our portfolio of Puerto Rico government securities and loans to governmental entities and of
our commercial, mortgage and consumer loan portfolios where private borrowers could be directly affected by
governmental action;
●
difficult to predict and may be impacted by factors such as the amount of Federal funds received by the P.R.
Government and the rate of expenditure of such funds, as well as the financial condition, liquidity and cash
management practices of the Puerto Rico Government and its instrumentalities;
●
man-made disasters, acts of violence or war or pandemics, epidemics and other health-related crises, or the fear of any
such event occurring, any of which could cause adverse consequences for our business, including, but not limited to,
disruptions in our operations;
4
●
earnings, efficiencies and our targeted sustainable return on tangible common equity of 14% by the end of 2025;
●
to service certain of Banco Popular de Puerto Rico’s key channels, as well as the entry into amended and restated
commercial agreements (the “Evertec Business Acquisition Transaction”);
●
●
related requirements and the impact of other proposed capital standards on our capital ratios;
●
by the FDIC to recover the losses to the deposit insurance fund (“DIF”) resulting from the receiverships of Silicon Valley
Bank and Signature Bank;
●
as acquisitions and dispositions;
●
Puerto Rico and the other markets in which our borrowers are located;
●
●
●
●
●
core financial transaction processing and information technology services, or of third parties providing services to us,
including as a result of cyberattacks, e-fraud, denial-of-services and computer intrusion, resulting in, among other
things, loss or breach of customer data, disruption of services, reputational damage or additional costs to Popular;
●
●
pending or future litigation and regulatory or government investigations or actions;
●
●
●
●
Moreover, the outcome of legal and regulatory proceedings, as discussed in “Part II, Item 1. Legal Proceedings,” is inherently
uncertain and depends on judicial interpretations of law and the findings of regulators, judges and/or juries. Investors should refer to
the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”), as well as “Part II,
Item 1A” of this report for a discussion of such factors and certain risks and uncertainties to which the Corporation is subject.
5
All forward-looking statements included in this Form 10-Q are based upon information available to Popular as of the date of this
Form 10-Q, and other than as required by law, including the requirements of applicable securities laws, we assume no obligation to
update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date
of such statements.
6
POPULAR, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
[UNAUDITED]
March 31,
December 31,
(In thousands, except share information)
2024
2023
Assets:
Cash and due from banks
$
320,486
$
420,462
Money market investments:
Time deposits with other banks
5,928,578
6,998,871
Total money market investments
5,928,578
6,998,871
Trading account debt securities, at fair value:
Other trading account debt securities
27,308
31,568
Debt securities available-for-sale, at fair value:
Pledged securities with creditors’ right to repledge
41,261
72,827
Other debt securities available-for-sale
17,976,663
16,656,217
Debt securities available-for-sale
18,017,924
16,729,044
Less – Allowance for credit losses
500
-
Debt securities available-for-sale, net
18,017,424
16,729,044
Debt securities held-to-maturity, at amortized cost:
Pledged securities with creditors’ right to repledge
27,372
27,083
Other debt securities held-to-maturity
8,055,788
8,167,252
Debt securities held-to-maturity (fair value 2024 - $
7,958,326
; 2023 - $
8,159,385
)
8,083,160
8,194,335
Less – Allowance for credit losses
5,731
5,780
Debt securities held-to-maturity, net
8,077,429
8,188,555
Equity securities (realizable value 2024 - $
196,324
; 2023 - $
194,641
)
195,747
193,726
Loans held-for-sale, at fair value
5,352
4,301
Loans held-in-portfolio
35,486,161
35,420,879
Less – Unearned income
367,423
355,908
739,544
729,341
Total loans held-in-portfolio, net
34,379,194
34,335,630
Premises and equipment, net
588,708
565,284
Other real estate
80,542
80,416
Accrued income receivable
266,908
263,433
Mortgage servicing rights, at fair value
114,964
118,109
Other assets
2,120,902
2,014,564
Goodwill
804,428
804,428
Other intangible assets
8,969
9,764
Total assets
$
70,936,939
$
70,758,155
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing
$
15,492,050
$
15,419,624
Interest bearing
48,316,734
48,198,619
Total deposits
63,808,784
63,618,243
Assets sold under agreements to repurchase
66,090
91,384
Notes payable
966,303
986,948
Other liabilities
918,448
914,627
Total liabilities
65,759,625
65,611,202
Commitments and contingencies (Refer to Note 20)
Stockholders’ equity:
Preferred stock,
30,000,000
885,726
885,726
)
22,143
22,143
Common stock, $
0.01
170,000,000
104,790,485
104,767,348
) and
72,284,875
72,153,621
)
1,048
1,048
Surplus
4,847,466
4,843,399
Retained earnings
4,253,030
4,194,851
Treasury stock - at cost,
32,505,610
32,613,727
)
(2,013,187)
(2,018,957)
Accumulated other comprehensive loss, net of tax
(1,933,186)
(1,895,531)
Total stockholders’ equity
5,177,314
5,146,953
Total liabilities and stockholders’ equity
$
70,936,939
$
70,758,155
The accompanying notes are an integral part of these Consolidated Financial Statements.
7
POPULAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Quarters ended March 31,
(In thousands, except per share information)
2024
2023
Interest income:
Loans
$
638,730
$
541,210
Money market investments
88,516
65,724
Investment securities
166,895
132,088
Total interest income
894,141
739,022
Interest expense:
Deposits
329,496
193,215
Short-term borrowings
1,192
2,885
Long-term debt
12,709
11,266
Total interest expense
343,397
207,366
Net interest income
550,744
531,656
Provision for credit losses
72,598
47,637
Net interest income after provision for credit losses
478,146
484,019
Non-interest income:
Service charges on deposit accounts
37,442
34,678
Other service fees
94,272
90,076
Mortgage banking activities (Refer to Note 9)
4,360
7,400
Net gain, including impairment on equity securities
1,103
1,100
Net gain on trading account debt securities
361
378
Adjustments to indemnity reserves on loans sold
(237)
612
Other operating income
26,517
27,717
Total non-interest income
163,818
161,961
Operating expenses:
Personnel costs
215,377
198,760
Net occupancy expenses
28,041
26,039
Equipment expenses
9,567
8,412
Other taxes
14,375
16,291
Professional fees
28,918
33,431
Technology and software expenses
79,462
68,559
Processing and transactional services
34,194
33,909
Communications
4,557
4,088
Business promotion
20,989
18,871
Deposit insurance
23,887
8,865
Other real estate owned (OREO) income
(5,321)
(1,694)
Other operating expenses
28,272
24,361
Amortization of intangibles
795
795
Total operating expenses
483,113
440,687
Income before income tax
158,851
205,293
Income tax expense
55,568
46,314
Net Income
$
103,283
$
158,979
Net Income Applicable to Common Stock
$
102,930
$
158,626
Net Income per Common Share - Basic
$
1.43
$
2.22
Net Income per Common Share - Diluted
$
1.43
$
2.22
The accompanying notes are an integral part of these Consolidated Financial Statements.
8
POPULAR, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
Quarters ended March 31,
(In thousands)
2024
2023
Net income
$
103,283
$
158,979
Other comprehensive (loss) income before tax:
Foreign currency translation adjustment
(4,020)
(5,245)
Amortization of net losses of pension and postretirement benefit plans
3,618
4,813
Unrealized holding (losses) gains on debt securities arising during the period
(73,030)
213,318
Amortization of unrealized losses of debt securities transfer from available-for-sale to held-to-
maturity
44,009
42,040
Unrealized net gains (losses) on cash flow hedges
-
(30)
Reclassification adjustment for net gains included in net income
-
(41)
Other comprehensive (loss) income before tax
(29,423)
254,855
Income tax expense
(8,232)
(31,752)
Total other comprehensive (loss) income, net of tax
(37,655)
223,103
Comprehensive income, net of tax
$
65,628
$
382,082
Tax effect allocated to each component of other comprehensive income (loss):
Quarters ended March 31,
(In thousands)
2024
2023
Amortization of net losses of pension and postretirement benefit plans
(1,356)
(1,805)
Unrealized holding (losses) gains on debt securities arising during the period
1,926
(21,566)
Amortization of unrealized losses of debt securities transfer from available-for-sale to held-to-
maturity
(8,802)
(8,407)
Unrealized net gains (losses) on cash flow hedges
-
11
Reclassification adjustment for net gains included in net income
-
15
Income tax expense
$
(8,232)
$
(31,752)
The accompanying notes are an integral part of these Consolidated Financial Statements.
9
POPULAR, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
other
Common
Preferred
Retained
Treasury
comprehensive
(In thousands)
stock
stock
Surplus
earnings
stock
(loss) Income
Total
Balance at December 31, 2022
$
1,047
$
22,143
$
4,790,993
$
3,834,348
$
(2,030,178)
$
(2,524,928)
$
4,093,425
Cumulative effect of accounting change
28,752
28,752
Net income
158,979
158,979
Issuance of stock
1,567
1,567
Dividends declared:
Common stock
[1]
(39,586)
(39,586)
Preferred stock
(353)
(353)
Common stock purchases
(2,970)
(2,970)
Stock based compensation
59
7,749
7,808
Other comprehensive income, net of tax
223,103
223,103
Balance at March 31, 2023
$
1,047
$
22,143
$
4,792,619
$
3,982,140
$
(2,025,399)
$
(2,301,825)
$
4,470,725
Balance at December 31, 2023
$
1,048
$
22,143
$
4,843,399
$
4,194,851
$
(2,018,957)
$
(1,895,531)
$
5,146,953
Net income
103,283
103,283
Issuance of stock
1,799
1,799
Dividends declared:
Common stock
[1]
(44,751)
(44,751)
Preferred stock
(353)
(353)
Common stock purchases
(3,576)
(3,576)
Stock based compensation
2,268
9,346
11,614
Other comprehensive loss, net of tax
(37,655)
(37,655)
Balance at March 31, 2024
$
1,048
$
22,143
$
4,847,466
$
4,253,030
$
(2,013,187)
$
(1,933,186)
$
5,177,314
[1]
Dividends declared per common share during the quarter ended March 31, 2024 - $
0.62
0.55
).
10
POPULAR, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
For the quarter ended
March 31,
March 31,
Disclosure of changes in number of shares:
2024
2023
Preferred Stock:
Balance at beginning and end of period
885,726
885,726
Common Stock – Issued:
Balance at beginning of period
104,767,348
104,657,522
Issuance of stock
23,137
25,488
Balance at end of period
104,790,485
104,683,010
Treasury stock
(32,505,610)
(32,717,026)
Common Stock – Outstanding
72,284,875
71,965,984
The accompanying notes are an integral part of these Consolidated Financial Statements.
11
POPULAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Quarters ended March 31,
(In thousands)
2024
2023
Cash flows from operating activities:
Net income
$
103,283
$
158,979
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses
72,598
47,637
Amortization of intangibles
795
795
Depreciation and amortization of premises and equipment
15,361
13,842
Net accretion of discounts and amortization of premiums and deferred fees
(51,360)
(2,276)
Interest capitalized on loans subject to the temporary payment moratorium or loss mitigation alternatives
(1,641)
(2,876)
Share-based compensation
11,479
7,873
Fair value adjustments on mortgage servicing rights
3,439
1,376
Adjustments to indemnity reserves on loans sold
237
(612)
Earnings from investments under the equity method, net of dividends or distributions
(11,792)
(8,621)
Deferred income tax expense (benefit)
9,513
(2,064)
Gain on:
Disposition of premises and equipment and other productive assets
(3,412)
(2,423)
Sale of loans, including valuation adjustments on loans held-for-sale and mortgage banking activities
(74)
(264)
Sale of foreclosed assets, including write-downs
(4,447)
(5,228)
Acquisitions of loans held-for-sale
(324)
(2,861)
Proceeds from sale of loans held-for-sale
8,283
9,148
Net originations on loans held-for-sale
(11,056)
(21,790)
Net decrease (increase) in:
Trading debt securities
6,465
(1,055)
Equity securities
(1,995)
(3,731)
Accrued income receivable
(22,719)
314
Other assets
38,702
25,072
Net (decrease) increase in:
Interest payable
(10,799)
(2,846)
Pension and other postretirement benefits obligation
916
4,038
Other liabilities
10,111
(59,381)
Total adjustments
58,280
(5,933)
Net cash provided by operating activities
161,563
153,046
Cash flows from investing activities:
Net decrease (increase) in money market investments
1,070,973
(483,178)
Purchases of investment securities:
Available-for-sale
(8,161,525)
(3,960,443)
Equity
(971)
(11,927)
Proceeds from calls, paydowns, maturities and redemptions of investment securities:
Available-for-sale
6,728,665
4,909,334
Held-to-maturity
154,009
3,818
Proceeds from sale of investment securities:
Equity
945
25,595
Net repayments (disbursements) on loans
2,354
(155,538)
Proceeds from sale of loans
15,356
3,276
Acquisition of loan portfolios
(141,730)
(145,735)
Return of capital from equity method investments
-
249
Acquisition of premises and equipment and other productive assets
(53,889)
(36,062)
Proceeds from sale of:
Premises and equipment and other productive assets
1,632
1,972
Foreclosed assets
26,773
21,417
Net cash (used in) provided by investing activities
(357,408)
172,778
12
Cash flows from financing activities:
Net increase (decrease) in:
Deposits
190,477
(293,780)
Assets sold under agreements to repurchase
(25,294)
(25,110)
Other short-term borrowings
-
(365,000)
Payments of notes payable
(21,000)
(1,000)
Principal payments of finance leases
(881)
(804)
Proceeds from issuance of notes payable
-
394,178
Proceeds from issuance of common stock
1,799
1,567
Dividends paid
(44,976)
(39,878)
Net payments for repurchase of common stock
(314)
(282)
Payments related to tax withholding for share-based compensation
(3,262)
(2,688)
Net cash provided by (used in) financing activities
96,549
(332,797)
Net decrease in cash and due from banks, and restricted cash
(99,296)
(6,973)
Cash and due from banks, and restricted cash at beginning of period
427,575
476,159
Cash and due from banks, and restricted cash at the end of the period
$
328,279
$
469,186
The accompanying notes are an integral part of these Consolidated Financial Statements.
13
Notes to Consolidated Financial
Statements (Unaudited)
Note 1 -
Nature of operations
14
Note 2 -
Basis of presentation
15
Note 3 -
New accounting pronouncements
16
Note 4 -
Restrictions on cash and due from banks and
certain securities
19
Note 5 -
Debt securities available-for-sale
20
Note 6 -
Debt securities held-to-maturity
23
Note 7 -
Loans
27
Note 8 -
Allowance for credit losses – loans held-in-
portfolio
36
Note 9 -
Mortgage banking activities
66
Note 10 -
Transfers of financial assets and mortgage
servicing assets
67
Note 11 -
Other real estate owned
70
Note 12 -
Other assets
71
Note 13 -
Goodwill and other intangible assets
72
Note 14 -
Deposits
74
Note 15 -
Borrowings
75
Note 16 -
Other liabilities
77
Note 17 -
Stockholders’ equity
78
Note 18 -
Other comprehensive income (loss)
79
Note 19 -
Guarantees
81
Note 20 -
Commitments and contingencies
83
Note 21-
Non-consolidated variable interest entities
87
Note 22 -
Related party transactions
89
Note 23 -
Fair value measurement
90
Note 24 -
Fair value of financial instruments
95
Note 25 -
Net income per common share
98
Note 26 -
Revenue from contracts with customers
99
Note 27 -
Leases
101
Note 28 -
Pension and postretirement benefits
103
Note 29 -
Stock-based compensation
104
Note 30 -
Income taxes
106
Note 31 -
Supplemental disclosure on the consolidated
statements of cash flows
110
Note 32 -
Segment reporting
111
14
Note 1 – Nature of Operations
Popular, Inc. (the “Corporation” or “Popular”) is a diversified, publicly-owned financial holding company subject to the supervision
and regulation of the Board of Governors of the Federal Reserve System. The Corporation has operations in Puerto Rico, the
mainland United States (“U.S.”) and the U.S. and British Virgin Islands. In Puerto Rico, the Corporation provides retail, mortgage,
and commercial banking services, through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as
investment banking, broker-dealer, auto and equipment leasing and financing, and insurance services through specialized
subsidiaries. In the U.S. mainland, the Corporation provides retail, mortgage, commercial banking services, as well as equipment
leasing and financing, through its New York-chartered banking subsidiary, Popular Bank (“PB” or “Popular U.S.”), which has
branches located in New York, New Jersey, and Florida.
15
Note 2 – Basis of Presentation
Basis of Presentation
The (unaudited) interim Consolidated Financial Statements are, in the opinion of management, a fair statement of the results for the
periods reported and include all necessary adjustments, all of a normal recurring nature, for a fair statement of such results. The
consolidated statement of financial condition presented as of December 31, 2023 was derived from audited Consolidated Financial
Statements of the Corporation for the year ended December 31, 2023.
Certain information and notes to the financial statements disclosures which would normally be included in financial statements
prepared in accordance with Accounting Principles Generally Accepted in the United States of America (US GAAP), have been
condensed or omitted from the unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, these financial statements should be read in conjunction with the audited Consolidated Financial
Statements of the Corporation for the year ended December 31, 2023, included in the 2023 Form 10-K. Operating results for the
interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.
Tax impact on Intercompany Distributions
The net income for the quarter ended March 31, 2024, included $
22.9
16.5
income tax expense and $
6.4
the Corporation’s U.S. subsidiary’s non-payment of taxes on certain intercompany distributions to the Bank Holding Company (BHC)
in Puerto Rico, a foreign corporation for U.S. tax purposes. The adjustment corrected errors for income tax expense that should
have been recognized of $
5.5
5.4
5.6
the years prior to 2022. The $
6.4
on the related late payment of the withholding tax, of which approximately $
3.0
of this adjustment, the deferred tax asset related to NOL of the BHC and its related valuation allowance was reduced by $
53.7
million. The Corporation evaluated the impact of the out-of-period adjustment and concluded it was not material to any previously
issued interim or annual consolidated financial statements and the adjustment is not expected to be material to the year ending
December 31, 2024.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
16
Note 3 - New accounting pronouncements
Recently Adopted Accounting Standards Updates
Standard
Description
Date of adoption
Effect on the financial statements
FASB ASU 2023-02,
Investments—Equity
Method and Joint
Ventures (Topic 323) -
Accounting for
Investments in Tax Credit
Structures Using the
Proportional Amortization
Method
The Financial Accounting Standards Board
("FASB") issued Accounting Standard
Update ("ASU") 2023-02 in March
2023, which amends Accounting Standards
Codification ("ASC") Topic 323 by
permitting the election to apply the
proportional amortization method to account
for tax equity investments that generate
income tax credits through investment in
low-income-housing tax credit (LIHTC)
structures and other tax credit programs if
certain conditions are met. The ASU also
eliminates the application of the ASC
Subtopic 323-740 to LIHTC investments not
accounted for using the proportional
amortization method and instead requires
the use of other guidance.
January 1, 2024
The Corporation was not impacted by
the adoption of this ASU since it does
not hold investments in tax equity
investments.
FASB ASU 2023-01,
Leases (Topic 842) -
Common Control
Arrangements
The FASB issued ASU 2023-01 in March
2023, which amends ASC Topic 842 and
requires the amortization leasehold
improvements associated with common
control leases over the useful life of the
leasehold improvements to the common
control group as long as the lessee controls
the use of the underlying assets through a
lease. In addition, the ASU requires
companies to account for leasehold
improvements associated with common
control leases as a transfer between entities
under common control through an
adjustments to equity if, and when, the
lessee no longer controls the use of the
underlying asset.
January 1, 2024
The Corporation was not impacted by
the adoption of this ASU since it does
not hold common control leasehold
improvements, however, it will consider
this guidance to determine the
amortization period for and accounting
treatment of leasehold improvements
associated with common control leases
acquired on or after the effective date.
FASB ASU 2022-03, Fair
Value Measurement
(Topic 820) - Fair Value
Measurement of Equity
Securities Subject to
Contractual Sale
Restriction
The FASB issued ASU 2022-03 in June
2022, which clarifies that a contractual
restriction that prohibits the sale of an equity
security is not considered part of the unit of
account of the equity security, therefore, is
not considered in measuring its fair value.
The ASU also provides enhanced
disclosures for equity securities subject to a
contractual sale restriction.
January 1, 2024
The Corporation was not impacted by
the adoption of this accounting
pronouncement since it does not hold
equity securities measured at fair value
with sale restrictions.
17
Accounting Standards Updates Not Yet Adopted
Standard
Description
Date of adoption
Effect on the financial statements
FASB ASU 2024-02,
Codification
Improvements—
Amendments to Remove
References to the
Concepts Statements
The FASB issued ASU 2024-02 in March
2024, which removes various references to
concept statements from the FASB
Accounting Standards Codification. The
ASU intends to simplify the Codification
and distinguish between nonauthoritative
and authoritative guidance.
January 1, 2025
The Corporation is currently evaluating
any impact that the adoption of this
guidance will have on its financial
statements and presentation and
disclosures.
FASB ASU 2024-01,
Compensation - Stock
Compensation (Topic 718)
- Scope Application of
Profits Interest and Similar
Awards
The FASB issued ASU 2024-01 in March
2024, which amends ASC Topic 718 by
including an illustrative example to
demonstrate how an entity would apply the
scope guidance in paragraph 718-10-15-3
to determine whether profits interest awards
should be accounted for in accordance with
ASC Topic 718. The ASU is intended to
reduce complexity and diversity in practice.
January 1, 2025
The Corporation is currently evaluating
any impact that the adoption of this
guidance will have on its financial
statements and presentation and
disclosures.
FASB ASU 2023-09,
Income Tax ( Topic 740) -
Improvements to Income
Tax Disclosures
The FASB issued ASU 2023-09 in
December 2023, which amends ASC Topic
740 by enhancing disclosures regarding
rate reconciliation and requiring the
disclosure of income taxes paid, income (or
loss) from continuing operations before
income tax expense and income tax
expense disaggregated by national, state
and foreign level. Disclosures that no longer
were considered cost beneficial or relevant
were removed from ASC Topic 740.
January 1, 2025
The Corporation is currently evaluating
any impact that the adoption of this
guidance will have on its financial
statements and presentation and
disclosures.
FASB ASU 2023-08,
Intangibles - Goodwill and
Other - Crypto Assets
(Subtopic 350-60) -
Accounting for and
Disclosure of Crypto
Assets
The FASB issued ASU 2023-08 in
December 2023, which amends ASC
Subtopic 350-60 by requiring that crypto
assets are measured at fair value in the
statement of financial position each
reporting period with changes from
remeasurement being recognized in net
income. The ASU also requires enhanced
disclosures for both annual and interim
reporting periods to provide investors with
relevant information to analyze and assess
the exposure and risk of significant
individual crypto asset holdings.
January 1, 2025
The Corporation does not expect to be
impacted by the adoption of this ASU
since it does not hold crypto-assets for
its platform users.
FASB ASU 2023-07,
Segment Reporting (Topic
280) - Improvements to
Reportable Segment
Disclosures
The FASB issued ASU 2023-07 in
November 2023, which amends ASC Topic
280 by requiring additional disclosures
about significant segment expenses.
For fiscal years
beginning on
January 1, 2024
For interim periods
within fiscal years
beginning after
January 1, 2025
The Corporation is currently evaluating
any impact that the adoption of this
guidance will have on its financial
statements and presentation and
disclosures.
18
Accounting Standards Updates Not Yet Adopted
Standard
Description
Date of adoption
Effect on the financial statements
FASB ASU 2023-06,
Disclosure Improvements -
Codification Amendments
in Response to the SEC’s
Disclosure Update and
Simplification Initiative
The FASB issued ASU 2023-06 in October
2023 which modifies the disclosure or
presentation requirements of various
subtopics in the Codification with the
purpose of aligning U.S. GAAP
requirements with those of the SEC under
Regulation S-X and S-K.
The date on which
the SEC removes
related disclosure
requirements from
Regulation S-X or
Regulation S-K. If by
June 30, 2027, the
SEC has not
removed the
applicable
requirements from
Regulation S-X or
Regulation S-K, the
pending content of
the related
amendment will be
removed from the
Codification and will
not become
effective for any
entity.
The Corporation does not expect to be
impacted by the adoption of this ASU
since it is currently subject to SEC's
current disclosure and presentation
requirements under Regulation S-X and
S-K.
FASB ASU 2023-05,
Business Combinations -
Joint Venture Formations
(Subtopic 805-60) -
Recognition and initial
measurement
The FASB issued ASU 2023-05 in August
2023, which amends ASC Subtopic 805-60
to include specific guidance about how joint
ventures should recognize and initially
measure assets contributed and liabilities
assumed. The amendments require that a
joint venture, upon formation, recognize and
initially measure its assets and liabilities at
fair value.
January 1, 2025
Upon adoption of this ASU, the
Corporation will consider this guidance
for the initial measure of assets and
liabilities of newly created joint
ventures.
19
Note 4 - Restrictions on cash and due from banks and certain securities
BPPR is required by regulatory agencies to maintain average reserve balances with the Federal Reserve Bank of New York (the
“Fed”) or other banks. Those required average reserve balances amounted to $
2.8
$
2.7
balances.
At March 31, 2024, the Corporation held $
61
debt securities available for sale and equity securities (December 31, 2023 - $
78
securities available for sale and equity securities consist primarily of assets held for the Corporation’s non-qualified retirement plans
and fund deposits guaranteeing possible liens or encumbrances over the title of insured properties.
20
Note 5 – Debt securities available-for-sale
The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield
and contractual maturities of debt securities available-for-sale at March 31, 2024 and December 31, 2023.
At March 31, 2024
Allowance
Gross
Gross
Weighted
Amortized
for credit
unrealized
unrealized
Fair
average
(In thousands)
cost
losses
gains
losses
value
yield
U.S. Treasury securities
Within 1 year
$
9,394,716
$
-
68
$
60,864
$
9,333,920
3.90
%
After 1 to 5 years
2,825,336
-
-
140,775
2,684,561
1.32
After 5 to 10 years
307,174
-
-
36,444
270,730
1.63
Total U.S. Treasury securities
12,527,226
-
68
238,083
12,289,211
3.26
Collateralized mortgage obligations - federal agencies
After 1 to 5 years
15,883
-
-
813
15,070
1.54
After 5 to 10 years
19,189
-
-
1,337
17,852
2.29
After 10 years
104,671
-
21
10,006
94,686
2.55
Total collateralized mortgage obligations - federal agencies
139,743
-
21
12,156
127,608
2.40
Mortgage-backed securities - federal agencies
Within 1 year
457
-
-
5
452
2.06
After 1 to 5 years
78,628
-
6
3,683
74,951
2.36
After 5 to 10 years
817,332
-
181
56,576
760,937
2.33
After 10 years
5,897,090
-
449
1,135,279
4,762,260
1.65
Total mortgage-backed securities - federal agencies
6,793,507
-
636
1,195,543
5,598,600
1.74
Other
Within 1 year
1,005
500
-
-
505
4.00
After 1 to 5 years
1,500
-
-
-
1,500
8.50
Total other
2,505
500
-
-
2,005
6.69
Total debt securities available-for-sale
[1]
$
19,462,981
$
500
725
$
1,445,782
$
18,017,424
2.72
%
[1]
11.8
agreements that the secured parties are not permitted to sell or repledge the collateral, of which $
11
.0 billion serve as collateral for public funds. The
Corporation had unpledged Available for Sale securities with a fair value of $
6.2
21
At December 31, 2023
Gross
Gross
Weighted
Amortized
unrealized
unrealized
Fair
average
(In thousands)
cost
gains
losses
value
yield
U.S. Treasury securities
Within 1 year
$
7,103,518
$
526
$
59,415
$
7,044,629
3.51
%
After 1 to 5 years
3,598,209
84
170,209
3,428,084
1.35
After 5 to 10 years
307,512
-
33,164
274,348
1.63
Total U.S. Treasury securities
11,009,239
610
262,788
10,747,061
2.75
Collateralized mortgage obligations - federal agencies
After 1 to 5 years
17,899
-
838
17,061
1.55
After 5 to 10 years
20,503
2
1,321
19,184
2.28
After 10 years
108,280
29
9,868
98,441
2.54
Total collateralized mortgage obligations - federal agencies
146,682
31
12,027
134,686
2.38
Mortgage-backed securities - federal agencies
Within 1 year
637
-
3
634
3.72
After 1 to 5 years
82,310
11
3,536
78,785
2.34
After 5 to 10 years
792,431
75
48,250
744,256
2.28
After 10 years
6,067,353
667
1,046,909
5,021,111
1.64
Total mortgage-backed securities - federal agencies
6,942,731
753
1,098,698
5,844,786
1.72
Other
Within 1 year
1,011
-
-
1,011
4.00
After 1 to 5 years
1,500
-
-
1,500
8.50
Total other
2,511
-
-
2,511
6.69
Total debt securities available-for-sale
[1]
$
18,101,163
$
1,394
$
1,373,513
$
16,729,044
2.35
%
[1]
Includes $
12
servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $
11.1
public funds. The Corporation had unpledged Available for Sale securities with a fair value of $
4.6
borrowing facilities.
The weighted average yield on debt securities available-for-sale is based on amortized cost; therefore, it does not give effect to
changes in fair value.
Debt securities not due on a single contractual maturity date, such as mortgage-backed securities and collateralized mortgage
obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations,
mortgage-backed securities and certain other securities may differ from their contractual maturities because they may be subject to
prepayments or may be called by the issuer.
At March 31, 2024, the Corporation did not intend to sell or believed it was more likely than not that it would be required to sell debt
securities classified as available-for-sale. There were
no
22
The following tables present the Corporation’s fair value and gross unrealized losses of debt securities available-for-sale,
aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at
March 31, 2024 and December 31, 2023.
At March 31, 2024
Less than 12 months
12 months or more
Total
Gross
Gross
Gross
Fair
Fair
Fair
(In thousands)
value
losses
value
losses
value
losses
U.S. Treasury securities
$
4,845,109
$
3,713
$
5,809,606
$
234,370
$
10,654,715
$
238,083
Collateralized mortgage obligations - federal agencies
2,127
2
123,238
12,154
125,365
12,156
Mortgage-backed securities
45,988
428
5,523,133
1,195,115
5,569,121
1,195,543
Total debt securities available-for-sale in an unrealized loss position
$
4,893,224
$
4,143
$
11,455,977
$
1,441,639
$
16,349,201
$
1,445,782
At December 31, 2023
Less than 12 months
12 months or more
Total
Gross
Gross
Gross
Fair
Fair
Fair
(In thousands)
value
losses
value
losses
value
losses
U.S. Treasury securities
$
244,925
$
5,126
$
6,550,941
$
257,662
$
6,795,866
$
262,788
Collateralized mortgage obligations - federal agencies
5,234
35
124,930
11,992
130,164
12,027
Mortgage-backed securities
37,118
405
5,779,260
1,098,293
5,816,378
1,098,698
Total debt securities available-for-sale in an unrealized loss position
$
287,277
$
5,566
$
12,455,131
$
1,367,947
$
12,742,408
$
1,373,513
As of March 31, 2024, the portfolio of available-for-sale debt securities reflects gross unrealized losses of $
1.4
by mortgage-backed securities, which have been impacted by a decline in fair value as a result of the rising interest rate
environment. The portfolio of available-for-sale debt securities is comprised mainly of U.S Treasuries and obligations from the U.S.
Government, its agencies or government sponsored entities, including Federal National Mortgage Association (“FNMA”), Federal
Home Loan Mortgage Corporation (“FHLMC”) and Government National Mortgage Association (“GNMA”). As discussed in Note 2 of
the 2023 Form 10-K, these securities carry an explicit or implicit guarantee from the U.S. Government, are highly rated by major
rating agencies, and have a long history of no credit losses. Accordingly, the Corporation applies a zero-credit loss assumption.
23
Note 6 –Debt securities held-to-maturity
The following tables present the amortized cost, allowance for credit losses, gross unrealized gains and losses, approximate fair
value, weighted average yield and contractual maturities of debt securities held-to-maturity at March 31, 2024 and December 31,
2023.
At March 31, 2024
Allowance
Carrying
Value
Gross
Gross
Weighted
Amortized
Book
[1]
for Credit
Net of
unrealized
unrealized
Fair
average
(In thousands)
cost
Value
Losses
Allowance
gains
losses
value
yield
U.S. Treasury securities
Within 1 year
$
597,620
$
597,620
$
-
$
597,620
$
-
$
7,857
$
589,763
2.61
%
After 1 to 5 years
8,030,813
7,416,332
-
7,416,332
-
111,295
7,305,037
1.37
Total U.S. Treasury securities
8,628,433
8,013,952
-
8,013,952
-
119,152
7,894,800
1.46
Obligations of Puerto Rico, States and
political subdivisions
Within 1 year
3,055
3,055
11
3,044
7
6
3,045
6.23
After 1 to 5 years
18,615
18,615
135
18,480
68
130
18,418
3.60
After 5 to 10 years
845
845
28
817
28
-
845
5.80
After 10 years
39,197
39,197
5,557
33,640
2,890
2,636
33,894
1.42
Total obligations of Puerto Rico, States and
political subdivisions
61,712
61,712
5,731
55,981
2,993
2,772
56,202
2.38
Collateralized mortgage obligations - federal
agencies
After 10 years
1,536
1,536
-
1,536
-
172
1,364
2.87
Total collateralized mortgage obligations -
federal agencies
1,536
1,536
-
1,536
-
172
1,364
2.87
Securities in wholly owned statutory business
trusts
After 10 years
5,960
5,960
-
5,960
-
-
5,960
6.33
Total securities in wholly owned statutory
business trusts
5,960
5,960
-
5,960
-
-
5,960
6.33
Total debt securities held-to-maturity [2]
$
8,697,641
$
8,083,160
$
5,731
$
8,077,429
$
2,993
$
122,096
$
7,958,326
1.47
%
[1]
Book value includes $
614
certain securities previously transferred from available-for-sale securities portfolio to the held-to-maturity securities portfolio.
[2]
Includes $
8
.0 billion pledged to secure public and trust deposits that the secured parties are not permitted to sell or repledge the collateral. The
Corporation had unpledged held-to-maturities securities with a fair value of $
69.3
24
At December 31, 2023
Allowance
Carrying
Value
Gross
Gross
Weighted
Amortized
Book
[1]
for Credit
Net of
unrealized
unrealized
Fair
average
(In thousands)
cost
Value
Losses
Allowance
gains
losses
value
yield
U.S. Treasury securities
Within 1 year
$
597,768
$
597,768
$
-
$
597,768
$
-
$
7,526
$
590,242
2.58
%
After 1 to 5 years
7,971,072
7,335,159
-
7,335,159
637
21,996
7,313,800
1.39
After 5 to 10 years
211,061
188,484
-
188,484
-
187
188,297
1.50
Total U.S. Treasury securities
8,779,901
8,121,411
-
8,121,411
637
29,709
8,092,339
1.47
Obligations of Puerto Rico, States and
political subdivisions
`
Within 1 year
4,820
4,820
9
4,811
3
-
4,814
6.17
%
After 1 to 5 years
20,171
20,171
147
20,024
96
125
19,995
3.80
After 5 to 10 years
845
845
28
817
28
-
845
5.80
After 10 years
39,572
39,572
5,596
33,976
2,814
2,766
34,024
1.41
Total obligations of Puerto Rico, States and
political subdivisions
65,408
65,408
5,780
59,628
2,941
2,891
59,678
2.55
Collateralized mortgage obligations - federal
agencies
Within 1 year
13
13
-
13
-
-
13
6.44
After 10 years
1,543
1,543
-
1,543
-
148
1,395
2.87
Total collateralized mortgage obligations -
federal agencies
1,556
1,556
-
1,556
-
148
1,408
2.90
Securities in wholly owned statutory business
trusts
After 10 years
5,960
5,960
-
5,960
-
-
5,960
6.33
Total securities in wholly owned statutory
business trusts
5,960
5,960
-
5,960
-
-
5,960
6.33
Total debt securities held-to-maturity [2]
$
8,852,825
$
8,194,335
$
5,780
$
8,188,555
$
3,578
$
32,748
$
8,159,385
1.48
%
[1]
Book value includes $
658
securities transferred from available-for-sale securities portfolio to the held-to-maturity securities portfolio as discussed in Note 6 of the 2023 Form
10-K.
[2]
Includes $
8.1
Corporation had unpledged held-to-maturities securities with a fair value of $
67.3
Debt securities not due on a single contractual maturity date, such as collateralized mortgage obligations, are classified in the period
of final contractual maturity. The expected maturities of collateralized mortgage obligations and certain other securities may differ
from their contractual maturities because they may be subject to prepayments or may be called by the issuer.
Credit Quality Indicators
The following describes the credit quality indicators by major security type that the Corporation considers to develop the estimate of
the allowance for credit losses for investment securities held-to-maturity.
As discussed in Note 2 of 2023 Form 10-K, U.S. Treasury securities carry an explicit guarantee from the U.S. Government are
highly rated by major rating agencies and have a long history of no credit losses. Accordingly, the Corporation applies a zero-credit
loss assumption and no allowance for credit losses (“ACL”) for these securities has been established.
At March 31, 2024 and December 31, 2023, the “Obligations of Puerto Rico, States and political subdivisions” classified as held-to-
maturity, includes securities issued by municipalities of Puerto Rico that are generally not rated by a credit rating agency. This
includes $
16
from certain property taxes imposed by the issuing municipality (December 31, 2023 - $
19
obligations, they also benefit from a pledge of the full faith, credit and unlimited taxing power of the issuing municipality, which is
required by law to levy property taxes in an amount sufficient for the payment of debt service on such general obligation bonds. The
Corporation performs periodic credit quality reviews of these securities and internally assigns standardized credit risk ratings based
on its evaluation. The Corporation considers these ratings in its estimate to develop the allowance for credit losses associated with
these securities. For the definitions of the obligor risk ratings, refer to the Credit Quality section of Note 8 to the Consolidated
Financial Statements.
25
The following presents the amortized cost basis of securities held by the Corporation issued by municipalities of Puerto Rico
aggregated by the internally assigned standardized credit risk rating:
At March 31, 2024
At December 31, 2023
(In thousands)
Securities issued by Puerto Rico municipalities
Watch
$
2,255
$
2,255
Pass
13,265
16,565
Total
$
15,520
$
18,820
At March 31, 2024, the portfolio of “Obligations of Puerto Rico, States and political subdivisions” also includes $
39
securities issued by the Puerto Rico Housing Finance Authority (“HFA”), a government instrumentality, for which the underlying
source of payment is second mortgage loans in Puerto Rico residential properties (not the government), but for which HFA, provides
a guarantee in the event of default and upon the satisfaction of certain other conditions (December 31, 2023 - $
40
securities are not rated by a credit rating agency.
The Corporation assesses the credit risk associated with these securities by evaluating the refreshed FICO scores of a
representative sample of the underlying borrowers. As of March 31, 2024, the average refreshed FICO score for the sample,
comprised of
68
% of the nominal value of the securities, used for the loss estimate was of
708
67
% and
708
,
respectively, at December 31, 2023). The loss estimates for this portfolio was based on the methodology established under CECL
for similar loan obligations. The Corporation does not consider the government guarantee when estimating the credit losses
associated with this portfolio.
A
deterioration of the Puerto Rico economy or of the fiscal health of the Government of Puerto Rico and/or its instrumentalities
(including if any of the issuing municipalities become subject to a debt restructuring proceeding under PROMESA) could adversely
affect the value of these securities, resulting in losses to the Corporation.
Refer to Note 20
to the Consolidated Financial Statements
for additional information on the Corporation’s exposure to the Puerto
Rico Government.
At March 31, 2024 and December 31, 2023, the portfolio of “Obligations of Puerto Rico, States and political subdivisions” also
includes $
7
Corporation applies a
zero
-credit loss assumption for these securities, and no ACL has been established for these securities given
that U.S. Treasury securities carry an explicit guarantee from the U.S. Government, are highly rated by major rating agencies, and
have a long history of no credit losses. Refer to Note 2 of 2023 Form 10-K for further details.
Delinquency status
At March 31, 2024 and December 31, 2023, there were
no
Allowance for credit losses on debt securities held-to-maturity
The following table provides the activity in the allowance for credit losses related to debt securities held-to-maturity by security type
at March 31, 2024 and March 31, 2023:
26
For the quarters ended March 31,
2024
2023
(In thousands)
Obligations of Puerto Rico, States and political subdivisions
Allowance for credit losses:
Beginning balance
$
5,780
$
6,911
Provision for credit losses (benefit)
(49)
(119)
Securities charged-off
-
-
Recoveries
-
-
Ending balance
$
5,731
$
6,792
The allowance for credit losses for the Obligations of Puerto Rico, States and political subdivisions includes $
0.2
securities issued by municipalities of Puerto Rico, and $
5.6
second mortgage loans on Puerto Rico residential properties (compared to $
0.2
5.6
31, 2023).
27
Note 7 – Loans
For a summary of the accounting policies related to loans, interest recognition and allowance for credit losses refer to Note 2 -
Summary of Significant Accounting Policies of the 2023 Form 10-K.
During the quarter ended March 31, 2024, the Corporation recorded purchases (including repurchases) of mortgage loans of $
86
million, and commercial loans of $
56
76
consumer loans of $
27
45
The Corporation performed whole-loan sales involving approximately $
11
12
commercial and construction loans during the quarter ended March 31, 2024 (March 31, 2023 - $
10
loans and $
2
securitized approximately $
1
1
FNMA mortgage-backed securities, compared to $
1
10
Delinquency status
The following tables present the amortized cost basis of loans held-in-portfolio (“HIP”), net of unearned income, by past due status,
and by loan class including those that are in non-performing status or that are accruing interest but are past due 90 days or more at
March 31, 2024 and December 31, 2023.
28
March 31, 2024
BPPR
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
days
days
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
19,384
$
2,027
$
106
$
21,517
$
282,134
$
303,651
$
106
$
-
Commercial real estate:
Non-owner occupied
2,378
3,278
7,922
13,578
2,982,907
2,996,485
7,922
-
Owner occupied
6,628
432
26,124
33,184
1,392,908
1,426,092
26,124
-
Commercial and industrial
3,020
8,552
33,741
45,313
4,699,810
4,745,123
29,171
4,570
Construction
-
-
-
-
162,724
162,724
-
-
Mortgage
254,008
107,224
385,062
746,294
5,737,257
6,483,551
166,473
218,589
Leasing
19,936
4,752
7,267
31,955
1,733,458
1,765,413
7,267
-
Consumer:
Credit cards
13,034
9,528
23,858
46,420
1,095,716
1,142,136
-
23,858
Home equity lines of credit
-
226
7
233
2,336
2,569
-
7
Personal
19,822
12,169
19,092
51,083
1,695,410
1,746,493
19,092
-
Auto
82,957
18,420
41,807
143,184
3,563,670
3,706,854
41,807
-
Other
1,022
150
939
2,111
151,567
153,678
632
307
Total
$
422,189
$
166,758
$
545,925
$
1,134,872
$
23,499,897
$
24,634,769
$
298,594
$
247,331
March 31, 2024
Popular U.S.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
days
days
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
3,434
$
-
$
8,700
$
12,134
$
2,068,850
$
2,080,984
$
8,700
$
-
Commercial real estate:
Non-owner occupied
740
1,364
2,407
4,511
2,056,063
2,060,574
2,407
-
Owner occupied
6,107
19,009
3,877
28,993
1,662,759
1,691,752
3,877
-
Commercial and industrial
9,961
628
6,634
17,223
2,263,137
2,280,360
6,423
211
Construction
8,825
-
-
8,825
837,754
846,579
-
-
Mortgage
25,558
533
28,071
54,162
1,245,949
1,300,111
28,071
-
Consumer:
Credit cards
-
-
-
-
17
17
-
-
Home equity lines of
credit
846
390
3,986
5,222
58,926
64,148
3,986
-
Personal
2,142
1,695
2,068
5,905
144,612
150,517
2,068
-
Other
-
-
1
1
8,926
8,927
1
-
Total
$
57,613
$
23,619
$
55,744
$
136,976
$
10,346,993
$
10,483,969
$
55,533
$
211
29
March 31, 2024
Popular, Inc.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
days
days
or more
past due
Current
Loans HIP
[2] [3]
loans
loans
Commercial multi-family
$
22,818
$
2,027
$
8,806
$
33,651
$
2,350,984
$
2,384,635
$
8,806
$
-
Commercial real estate:
Non-owner occupied
3,118
4,642
10,329
18,089
5,038,970
5,057,059
10,329
-
Owner occupied
12,735
19,441
30,001
62,177
3,055,667
3,117,844
30,001
-
Commercial and industrial
12,981
9,180
40,375
62,536
6,962,947
7,025,483
35,594
4,781
Construction
8,825
-
-
8,825
1,000,478
1,009,303
-
-
Mortgage
[1]
279,566
107,757
413,133
800,456
6,983,206
7,783,662
194,544
218,589
Leasing
19,936
4,752
7,267
31,955
1,733,458
1,765,413
7,267
-
Consumer:
Credit cards
13,034
9,528
23,858
46,420
1,095,733
1,142,153
-
23,858
Home equity lines of credit
846
616
3,993
5,455
61,262
66,717
3,986
7
Personal
21,964
13,864
21,160
56,988
1,840,022
1,897,010
21,160
-
Auto
82,957
18,420
41,807
143,184
3,563,670
3,706,854
41,807
-
Other
1,022
150
940
2,112
160,493
162,605
633
307
Total
$
479,802
$
190,377
$
601,669
$
1,271,848
$
33,846,890
$
35,118,738
$
354,127
$
247,542
[1]
It is the Corporation’s policy to report delinquent residential mortgage loans insured by Federal Housing Administration (“FHA”) or guaranteed by
the U.S. Department of Veterans Affairs (“VA”) as accruing loans past due 90 days or more as opposed to non-performing since the principal
repayment is insured. These balances include $
93
longer accruing interest as of March 31, 2024. Furthermore, as of March 31, 2024, the Corporation had approximately $
37
mortgage loans which are guaranteed by FHA, but which are currently not accruing interest. Due to the guaranteed nature of the loans, it is the
Corporation’s policy to exclude these balances from non-performing assets.
[2]
Loans held-in-portfolio are net of $
367
5
[3]
Includes $
14
of which $
7.0
7
Bank ("FRB") for discount window borrowings. As of March 31, 2024, the Corporation had an available borrowing facility with the FHLB and the
discount window of Federal Reserve Bank of New York of $
3.8
4.6
30
December 31, 2023
BPPR
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
524
$
-
$
1,991
$
2,515
$
289,427
$
291,942
$
1,991
$
-
Commercial real estate:
Non-owner occupied
5,510
77
8,745
14,332
2,990,922
3,005,254
8,745
-
Owner occupied
2,726
249
29,430
32,405
1,365,978
1,398,383
29,430
-
Commercial and industrial
6,998
3,352
36,210
46,560
4,749,666
4,796,226
32,826
3,384
Construction
-
-
6,378
6,378
163,479
169,857
6,378
-
Mortgage
260,897
114,282
416,528
791,707
5,600,117
6,391,824
175,106
241,422
Leasing
20,140
6,719
8,632
35,491
1,696,318
1,731,809
8,632
-
Consumer:
Credit cards
13,243
9,912
23,281
46,436
1,089,292
1,135,728
-
23,281
Home equity lines of credit
230
-
26
256
2,392
2,648
-
26
Personal
19,065
14,611
19,031
52,707
1,723,603
1,776,310
19,031
-
Auto
100,061
27,443
45,615
173,119
3,487,661
3,660,780
45,615
-
Other
1,641
204
1,213
3,058
147,104
150,162
964
249
Total
$
431,035
$
176,849
$
597,080
$
1,204,964
$
23,305,959
$
24,510,923
$
328,718
$
268,362
December 31, 2023
Popular U.S.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
9,141
$
2,001
$
-
$
11,142
$
2,112,536
$
2,123,678
$
-
$
-
Commercial real estate:
Non-owner occupied
566
1,036
1,117
2,719
2,079,448
2,082,167
1,117
-
Owner occupied
30,560
-
6,274
36,834
1,645,418
1,682,252
6,274
-
Commercial and industrial
7,815
697
3,881
12,393
2,317,502
2,329,895
3,772
109
Construction
-
-
-
-
789,423
789,423
-
-
Mortgage
48,818
7,821
11,191
67,830
1,236,263
1,304,093
11,191
-
Consumer:
Credit cards
-
-
-
-
19
19
-
-
Home equity lines of credit
1,472
4
3,733
5,209
58,096
63,305
3,733
-
Personal
2,222
1,948
2,805
6,975
161,962
168,937
2,805
-
Other
4
-
1
5
10,274
10,279
1
-
Total
$
100,598
$
13,507
$
29,002
$
143,107
$
10,410,941
$
10,554,048
$
28,893
$
109
31
December 31, 2023
Popular, Inc.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
or more
past due
Current
Loans HIP
[2]
[3]
loans
loans
Commercial multi-family
$
9,665
$
2,001
$
1,991
$
13,657
$
2,401,963
$
2,415,620
$
1,991
$
-
Commercial real estate:
Non-owner occupied
6,076
1,113
9,862
17,051
5,070,370
5,087,421
9,862
-
Owner occupied
33,286
249
35,704
69,239
3,011,396
3,080,635
35,704
-
Commercial and industrial
14,813
4,049
40,091
58,953
7,067,168
7,126,121
36,598
3,493
Construction
-
-
6,378
6,378
952,902
959,280
6,378
-
Mortgage
[1]
309,715
122,103
427,719
859,537
6,836,380
7,695,917
186,297
241,422
Leasing
20,140
6,719
8,632
35,491
1,696,318
1,731,809
8,632
-
Consumer:
Credit cards
13,243
9,912
23,281
46,436
1,089,311
1,135,747
-
23,281
Home equity lines of credit
1,702
4
3,759
5,465
60,488
65,953
3,733
26
Personal
21,287
16,559
21,836
59,682
1,885,565
1,945,247
21,836
-
Auto
100,061
27,443
45,615
173,119
3,487,661
3,660,780
45,615
-
Other
1,645
204
1,214
3,063
157,378
160,441
965
249
Total
$
531,633
$
190,356
$
626,082
$
1,348,071
$
33,716,900
$
35,064,971
$
357,611
$
268,471
[1]
It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due
90 days or more as opposed to non-performing since the principal repayment is insured. These balances include $
106
mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of December 31, 2023. Furthermore, as of
December 31, 2023, the Corporation had approximately $
38
currently not accruing interest. Due to the guaranteed nature of the loans, it is the Corporation’s policy to exclude these balances from non-
performing assets.
[2]
Loans held-in-portfolio are net of $
356
4
[3]
Includes $
14.2
of which $
7.0
7.2
Bank (FRB) for discount window borrowings. As of December 31, 2023, the Corporation had an available borrowing facility with the FHLB and the
discount window of Federal Reserve Bank of New York of $
3.5
4.4
Recognition of interest income on mortgage loans is generally discontinued when loans are 90 days or more in arrears on payments
of principal or interest. The Corporation discontinues the recognition of interest income on residential mortgage loans insured by the
FHA or guaranteed by the VA when 15 months delinquent as to principal or interest, since the principal repayment on these loans is
insured.
At March 31, 2024, mortgage loans held-in-portfolio include $
2.3
2.2
FHA, or guaranteed by the VA of which $
218.7
241.6
portfolio of guaranteed loans includes $
93
of March 31, 2024 (December 31, 2023 - $
106
37
Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest at March 31, 2024 (December 31, 2023 -
$
38
Loans with a delinquency status of 90 days past due as of March 31, 2024 include $
10
securities (December 31, 2023 - $
11
obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase
option are required to be reflected on the financial statements of BPPR with an offsetting liability. Loans in our serviced GNMA
portfolio benefit from payment forbearance programs but continue to reflect the contractual delinquency until the borrower repays
deferred payments or completes a payment deferral modification or other borrower assistance alternative.
The following tables present the amortized cost basis of non-accrual loans as of March 31, 2024 and December 31, 2023 by class of
loans:
32
March 31, 2024
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Non-accrual
with no
allowance
Non-accrual
with
allowance
Non-accrual
with no
allowance
Non-accrual
with
allowance
Non-accrual
with no
allowance
Non-accrual
with
allowance
Commercial multi-family
$
-
$
106
$
8,700
$
-
$
8,700
$
106
Commercial real estate non-owner occupied
3,635
4,287
1,344
1,063
4,979
5,350
Commercial real estate owner occupied
17,541
8,583
3,877
-
21,418
8,583
Commercial and industrial
18,914
10,257
-
6,423
18,914
16,680
Mortgage
82,843
83,630
190
27,881
83,033
111,511
Leasing
453
6,814
-
-
453
6,814
Consumer:
-
-
-
3,986
-
3,986
3,458
15,634
-
2,068
3,458
17,702
1,809
39,998
-
-
1,809
39,998
263
369
-
1
263
370
Total
$
128,916
$
169,678
$
14,111
$
41,422
$
143,027
$
211,100
December 31, 2023
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Non-accrual
with no
allowance
Non-accrual
with
allowance
Non-accrual
with no
allowance
Non-accrual
with
allowance
Non-accrual
with no
allowance
Non-accrual
with
allowance
Commercial multi-family
$
-
$
1,991
$
-
$
-
$
-
$
1,991
Commercial real estate non-owner occupied
3,695
5,050
-
1,117
3,695
6,167
Commercial real estate owner occupied
20,432
8,998
3,877
2,397
24,309
11,395
Commercial and industrial
6,991
25,835
-
3,772
6,991
29,607
Construction
-
6,378
-
-
-
6,378
Mortgage
84,677
90,429
120
11,071
84,797
101,500
Leasing
481
8,151
-
-
481
8,151
Consumer:
-
-
-
3,733
-
3,733
3,589
15,442
-
2,805
3,589
18,247
1,833
43,782
-
-
1,833
43,782
263
701
-
1
263
702
Total
$
121,961
$
206,757
$
3,997
$
24,896
$
125,958
$
231,653
The Corporation has designated loans classified as collateral dependent for which the ACL is measured based on the fair value of
the collateral less cost to sell, when foreclosure is probable or when the repayment is expected to be provided substantially by the
sale or operation of the collateral and the borrower is experiencing financial difficulty. The fair value of the collateral is based on
appraisals, which may be adjusted due to their age, and the type, location, and condition of the property or area or general market
conditions to reflect the expected change in value between the effective date of the appraisal and the measurement date. Appraisals
are updated every one to two years depending on the type of loan and the total exposure of the borrower.
Loans in non-accrual status with no allowance at March 31, 2024 include $
143
2023 - $
126
3
31, 2024 (March 31, 2023 - $
4
The following tables present the amortized cost basis of collateral-dependent loans, for which the ACL was measured based on the
fair value of the collateral less cost to sell, by class of loans and type of collateral as of March 31, 2024 and December 31, 2023:
33
March 31, 2024
(In thousands)
Real Estate
Auto
Equipment
Accounts
Receivables
Other
Total
BPPR
Commercial multi-family
$
1,325
$
-
$
-
$
-
-
$
1,325
Commercial real estate:
Non-owner occupied
159,712
-
-
-
-
159,712
Owner occupied
22,840
-
-
-
-
22,840
Commercial and industrial
1,130
-
-
2,172
23,693
26,995
Mortgage
80,487
-
-
-
-
80,487
Leasing
-
1,257
-
-
-
1,257
Consumer:
Personal
3,708
-
-
-
-
3,708
Auto
-
13,910
-
-
-
13,910
Other
-
-
-
-
303
303
Total BPPR
$
269,202
$
15,167
$
-
$
2,172
23,996
$
310,537
Popular U.S.
Commercial multi-family
$
8,700
$
-
$
-
$
-
-
$
8,700
Commercial real estate:
Non-owner occupied
1,344
$
-
-
-
-
1,344
Owner occupied
3,877
$
-
-
-
-
3,877
Commercial and industrial
-
-
70
-
2,297
2,367
Mortgage
1,040
-
-
-
-
1,040
Total Popular U.S.
$
14,961
$
-
$
70
$
-
2,297
$
17,328
Popular, Inc.
Commercial multi-family
$
10,025
$
-
$
-
$
-
-
$
10,025
Commercial real estate:
Non-owner occupied
161,056
-
-
-
-
161,056
Owner occupied
26,717
-
-
-
-
26,717
Commercial and industrial
1,130
-
70
2,172
25,990
29,362
Mortgage
81,527
-
-
-
-
81,527
Leasing
-
1,257
-
-
-
1,257
Consumer:
Personal
3,708
-
-
-
-
3,708
Auto
-
13,910
-
-
-
13,910
Other
-
-
-
-
303
303
Total Popular, Inc.
$
284,163
$
15,167
$
70
$
2,172
26,293
$
327,865
34
December 31, 2023
(In thousands)
Real Estate
Auto
Equipment
Other
Total
BPPR
Commercial multi-family
$
1,339
$
-
$
-
$
-
$
1,339
Commercial real estate:
Non-owner occupied
160,555
-
-
-
160,555
Owner occupied
25,848
-
-
-
25,848
Commercial and industrial
1,103
-
-
30,287
31,390
Construction
6,378
-
-
-
6,378
Mortgage
85,113
-
-
-
85,113
Leasing
-
1,373
-
-
1,373
Consumer:
Personal
4,338
-
-
-
4,338
Auto
-
12,965
-
-
12,965
Other
-
-
-
305
305
Total BPPR
$
284,674
$
14,338
$
-
$
30,592
$
329,604
Popular U.S.
Commercial real estate:
Owner occupied
3,877
-
-
-
3,877
Commercial and industrial
-
-
105
400
505
Construction
5,990
-
-
-
5,990
Mortgage
1,303
-
-
-
1,303
Total Popular U.S.
$
11,170
$
-
$
105
$
400
$
11,675
Popular, Inc.
Commercial multi-family
$
1,339
$
-
$
-
$
-
$
1,339
Commercial real estate:
Non-owner occupied
160,555
-
-
-
160,555
Owner occupied
29,725
-
-
-
29,725
Commercial and industrial
1,103
-
105
30,687
31,895
Construction
12,368
-
-
-
12,368
Mortgage
86,416
-
-
-
86,416
Leasing
-
1,373
-
-
1,373
Consumer:
Personal
4,338
-
-
-
4,338
Auto
-
12,965
-
-
12,965
Other
-
-
-
305
305
Total Popular, Inc.
$
295,844
$
14,338
$
105
$
30,992
$
341,279
35
Purchased Credit Deteriorated (PCD) Loans
The Corporation has purchased loans during the quarter for which there was, at acquisition, evidence of more than insignificant
deterioration of credit quality since origination. The carrying amount of those loans is as follows:
(In thousands)
March 31, 2024
March 31, 2023
Purchase price of loans at acquisition
$
426
$
255
Allowance for credit losses at acquisition
17
68
Non-credit discount / (premium) at acquisition
-
9
Par value of acquired loans at acquisition
$
443
$
332
36
Note 8 – Allowance for credit losses – loans held-in-portfolio
The
Corporation follows the current expected credit loss (“CECL”) model, to establish and evaluate the adequacy of the ACL to
provide for expected losses in the loan portfolio. This model establishes a forward-looking methodology that reflects the expected
credit losses over the lives of financial assets, starting when such assets are first acquired or originated. In addition, CECL provides
that the initial ACL on PCD financial assets be recorded as an increase to the purchase price, with subsequent changes to the
allowance recorded as a credit loss expense. The provision for credit losses recorded in current operations is based on this
methodology. Loan losses are charged, and recoveries are credited to the ACL. The Corporation’s modeling framework includes
competing risk models that generate lifetime default and prepayment estimates as well as other loan level techniques to estimate
loss severity. These models combine credit risk factors, which include the impact of loan modifications, with macroeconomic
expectations to derive the lifetime expected loss.
At March 31,2024, the Corporation estimated the ACL by weighting the outputs of optimistic, baseline, and pessimistic scenarios.
Among the three scenarios used to estimate the ACL, the baseline is assigned the highest probability, followed by the pessimistic
scenario given the uncertainties in the economic outlook and downside risk. The weightings applied are subject to evaluation on a
quarterly basis as part of the ACL’s governance process. The Corporation evaluates, at least on an annual basis, the assumptions
tied to the CECL accounting framework. These include the reasonable and supportable period as well as the reversion window.
The 2024 annualized GDP growth in the baseline scenario improved to 2.0% and 2.3% for Puerto Rico and the United States,
respectively, compared to 1.2% and 1.7% in the previous quarter. The 2024 forecasted average unemployment rate for Puerto Rico
and the United States remained stable at 6.5% and 3.9%, respectively, compared to 6.8% and 4.0% in previous forecast.
The following tables present the changes in the ACL of loans held-in-portfolio and unfunded commitments for the quarters ended
March 31, 2024 and 2023.
37
For the quarter ended March 31, 2024
BPPR
Provision for
Allowance for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
Balances
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
3,614
$
(48)
$
-
$
-
$
1
$
3,567
Commercial real estate non-owner occupied
53,754
(413)
-
-
325
53,666
Commercial real estate owner occupied
40,637
5,147
-
(2,785)
538
43,537
Commercial and industrial
107,577
376
-
(6,669)
1,560
102,844
Total Commercial
205,582
5,062
-
(9,454)
2,424
203,614
Construction
5,294
(2,180)
-
-
-
3,114
Mortgage
72,440
(319)
17
(765)
5,191
76,564
Leasing
9,708
2,968
-
(4,850)
1,165
8,991
Consumer
80,487
21,640
-
(16,396)
2,438
88,169
103
103
-
(197)
93
102
101,181
20,263
-
(24,349)
2,409
99,504
157,931
13,371
-
(20,167)
6,321
157,456
7,132
100
-
(664)
240
6,808
Total Consumer
346,834
55,477
-
(61,773)
11,501
352,039
Total - Loans
$
639,858
$
61,008
$
17
$
(76,842)
$
20,281
$
644,322
Allowance for credit losses - unfunded commitments:
Commercial
$
5,062
$
(120)
$
-
$
-
$
-
$
4,942
Construction
1,618
(177)
-
-
-
1,441
Ending balance - unfunded commitments [1]
$
6,680
$
(297)
$
-
$
-
$
-
$
6,383
[1] Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
38
For the quarter ended March 31, 2024
Popular U.S.
Provision for
Beginning
credit losses -
Ending
(In thousands)
Balance
(benefit)
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
10,126
$
(510)
$
(441)
$
1
$
9,176
Commercial real estate non-owner occupied
11,699
195
-
64
11,958
Commercial real estate owner occupied
16,227
4,019
-
24
20,270
Commercial and industrial
14,779
3,203
(564)
156
17,574
Total Commercial
52,831
6,907
(1,005)
245
58,978
Construction
7,392
633
-
-
8,025
Mortgage
10,774
(925)
-
25
9,874
Consumer
1,875
(253)
(7)
155
1,770
16,609
4,991
(5,712)
685
16,573
2
25
(31)
6
2
Total Consumer
18,486
4,763
(5,750)
846
18,345
Total - Loans
$
89,483
$
11,378
$
(6,755)
$
1,116
$
95,222
Allowance for credit losses - unfunded commitments:
Commercial
$
1,851
$
691
$
-
$
-
$
2,542
Construction
8,446
(609)
-
-
7,837
Consumer
29
(24)
-
-
5
Ending balance - unfunded commitments [1]
$
10,326
$
58
$
-
$
-
$
10,384
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
39
For the quarter ended March 31, 2024
Popular Inc.
Provision for
Allowance
for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
13,740
$
(558)
$
-
$
(441)
$
2
$
12,743
Commercial real estate non-owner occupied
65,453
(218)
-
-
389
65,624
Commercial real estate owner occupied
56,864
9,166
-
(2,785)
562
63,807
Commercial and industrial
122,356
3,579
-
(7,233)
1,716
120,418
Total Commercial
258,413
11,969
-
(10,459)
2,669
262,592
Construction
12,686
(1,547)
-
-
-
11,139
Mortgage
83,214
(1,244)
17
(765)
5,216
86,438
Leasing
9,708
2,968
-
(4,850)
1,165
8,991
Consumer
80,487
21,640
-
(16,396)
2,438
88,169
1,978
(150)
-
(204)
248
1,872
117,790
25,254
-
(30,061)
3,094
116,077
157,931
13,371
-
(20,167)
6,321
157,456
7,134
125
-
(695)
246
6,810
Total Consumer
365,320
60,240
-
(67,523)
12,347
370,384
Total - Loans
$
729,341
$
72,386
$
17
$
(83,597)
$
21,397
$
739,544
Allowance for credit losses - unfunded commitments:
Commercial
$
6,913
$
571
$
-
$
-
$
-
$
7,484
Construction
10,064
(786)
-
-
-
9,278
Consumer
29
(24)
-
-
-
5
Ending balance - unfunded commitments [1]
$
17,006
$
(239)
$
-
$
-
$
-
$
16,767
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
40
For the quarter ended March 31, 2023
BPPR
Impact of
Provision for
Allowance for
Beginning
Adopting
credit losses
credit losses -
Ending
(In thousands)
Balance
ASU 2022-02
(benefit)
PCD Loans
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
5,210
$
-
$
(454)
$
-
$
-
$
-
$
4,756
Commercial real estate non-owner occupied
52,475
-
1,284
-
-
135
53,894
Commercial real estate owner occupied
48,393
(1,161)
(2,730)
-
(3)
1,510
46,009
Commercial and industrial
68,217
(552)
9,819
-
(1,607)
1,165
77,042
Total Commercial
174,295
(1,713)
7,919
-
(1,610)
2,810
181,701
Construction
2,978
-
94
-
-
-
3,072
Mortgage
117,344
(33,556)
1,267
68
(846)
4,800
89,077
Leasing
20,618
(35)
734
-
(1,417)
1,090
20,990
Consumer
58,670
-
15,570
-
(8,676)
2,389
67,953
103
-
(39)
-
(33)
69
100
96,369
(7,020)
11,104
-
(13,580)
1,535
88,408
129,735
(21)
8,319
-
(12,118)
4,914
130,829
15,433
-
235
-
(11,007)
216
4,877
Total Consumer
300,310
(7,041)
35,189
-
(45,414)
9,123
292,167
Total - Loans
$
615,545
$
(42,345)
$
45,203
$
68
$
(49,287)
$
17,823
$
587,007
Allowance for credit losses - unfunded commitments:
Commercial
$
4,336
$
-
$
564
$
-
$
-
$
-
$
4,900
Construction
2,022
-
(76)
-
-
-
1,946
Ending balance - unfunded commitments [1]
$
6,358
$
-
$
488
$
-
$
-
$
-
$
6,846
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
41
For the quarter ended March 31, 2023
Popular U.S.
Impact of
Provision for
Beginning
Adopting
credit losses
Ending
(In thousands)
Balance
ASU 2022-02
(benefit)
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
21,101
$
-
$
(493)
$
-
$
2
$
20,610
Commercial real estate non-owner occupied
19,065
-
(2,961)
-
1,852
17,956
Commercial real estate owner occupied
8,688
-
(224)
-
24
8,488
Commercial and industrial
12,227
-
2,528
(499)
968
15,224
Total Commercial
61,081
-
(1,150)
(499)
2,846
62,278
Construction
1,268
-
(10)
-
-
1,258
Mortgage
17,910
(2,098)
(426)
-
14
15,400
Consumer
-
-
1
(1)
-
-
2,439
-
(712)
(143)
269
1,853
22,057
(1,140)
4,191
(4,170)
383
21,321
2
-
49
(53)
5
3
Total Consumer
24,498
(1,140)
3,529
(4,367)
657
23,177
Total - Loans
$
104,757
$
(3,238)
$
1,943
$
(4,866)
$
3,517
$
102,113
Allowance for credit losses - unfunded commitments:
Commercial
$
1,175
$
-
$
54
$
-
$
-
$
1,229
Construction
1,184
-
94
-
-
1,278
Consumer
88
-
(26)
-
-
62
Ending balance - unfunded commitments [1]
$
2,447
$
-
$
122
$
-
$
-
$
2,569
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
42
For the quarter ended March 31, 2023
Popular Inc.
Impact of
Provision for
Allowance for
Beginning
Adopting
credit losses
credit losses -
Ending
(In thousands)
Balance
ASU 2022-02
(benefit)
PCD Loans
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
26,311
$
-
$
(947)
$
-
$
-
$
2
$
25,366
Commercial real estate non-owner occupied
71,540
-
(1,677)
-
-
1,987
71,850
Commercial real estate owner occupied
57,081
(1,161)
(2,954)
-
(3)
1,534
54,497
Commercial and industrial
80,444
(552)
12,347
-
(2,106)
2,133
92,266
Total Commercial
235,376
(1,713)
6,769
-
(2,109)
5,656
243,979
Construction
4,246
-
84
-
-
-
4,330
Mortgage
135,254
(35,654)
841
68
(846)
4,814
104,477
Leasing
20,618
(35)
734
-
(1,417)
1,090
20,990
Consumer
58,670
-
15,571
-
(8,677)
2,389
67,953
2,542
-
(751)
-
(176)
338
1,953
118,426
(8,160)
15,295
-
(17,750)
1,918
109,729
129,735
(21)
8,319
-
(12,118)
4,914
130,829
15,435
-
284
-
(11,060)
221
4,880
Total Consumer
324,808
(8,181)
38,718
-
(49,781)
9,780
315,344
Total - Loans
$
720,302
$
(45,583)
$
47,146
$
68
$
(54,153)
$
21,340
$
689,120
Allowance for credit losses - unfunded commitments:
Commercial
$
5,511
$
-
$
618
$
-
$
-
$
-
$
6,129
Construction
3,206
-
18
-
-
-
3,224
Consumer
88
-
(26)
-
-
-
62
Ending balance - unfunded commitments [1]
$
8,805
$
-
$
610
$
-
$
-
$
-
$
9,415
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
Modifications
A modification constitutes a change in loan terms in the form of principal forgiveness, an interest rate reduction, other than-
insignificant payment delay, term extension or combination of the above made to a borrower experiencing financial difficulty.
The amount of outstanding commitments to lend additional funds to debtors with financial difficulties owing receivables whose terms
have been modified during the quarters ended March 31, 2024 and March 31, 2023 amounted to $
4.2
7.0
respectively, related to the commercial loan portfolios.
The following tables show the amortized cost basis of the loans modified to borrowers experiencing financial difficulties at the end of
the reporting period disaggregated by class of financing receivable and type of concession granted for the quarters ended March 31,
2024 and March 31, 2023. Loans modified to borrowers under financial difficulties that were fully paid down, charged-off or
foreclosed upon by period end are not reported.
43
Loan Modifications Made to Borrowers Experiencing Financial Difficulty for the quarter ended March 31,2024
Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
Commercial and industrial
$
387
0.01
%
$
-
-
%
$
387
0.01
%
Consumer:
129
0.01
%
-
-
%
129
0.01
%
243
0.01
%
-
-
%
243
0.01
%
Total
$
759
-
%
$
-
-
%
$
759
-
%
Term Extension
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
CRE non-owner occupied
$
36,718
1.23
%
$
-
-
%
$
36,718
0.73
%
CRE owner occupied
16,366
1.15
%
-
-
%
16,366
0.52
%
Commercial and industrial
2,494
0.05
%
-
-
%
2,494
0.04
%
Mortgage
12,979
0.20
%
-
-
%
12,979
0.17
%
Consumer:
199
0.01
%
5
-
%
204
0.01
%
Total
$
68,756
0.28
%
$
5
-
%
$
68,761
0.20
%
Other-Than-Insignificant Payment Delays
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
CRE owner occupied
$
10,312
0.72
%
$
-
-
%
$
10,312
0.33
%
Commercial and industrial
5,920
0.12
%
-
-
%
5,920
0.08
%
Total
$
16,232
0.07
%
$
-
-
%
$
16,232
0.05
%
Combination - Term extension and Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
CRE non-owner occupied
$
891
0.03
%
$
-
-
%
$
891
0.02
%
Commercial and industrial
101
-
%
-
-
%
101
-
%
Mortgage
3,422
0.05
%
38
-
%
3,460
0.04
%
Consumer:
1,056
0.06
%
145
0.10
%
1,201
0.06
%
Total
$
5,470
0.02
%
$
183
-
%
$
5,653
0.02
%
Combination - Other-Than-Insignificant Payment Delays and Interest Rate Reduction
Puerto Rico
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
Commercial and industrial
$
16
-
%
$
-
-
%
$
16
-
%
Consumer:
315
0.03
%
-
-
%
315
0.03
%
Total
$
331
-
%
$
-
-
%
$
331
-
%
44
Loan Modifications Made to Borrowers Experiencing Financial Difficulty for the quarter ended March 31,2023
Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
Mortgage
$
227
-
%
$
-
-
%
$
227
-
%
Consumer:
497
0.05
%
-
-
%
497
0.05
%
172
0.01
%
-
-
%
172
0.01
%
3
-
%
-
-
%
3
-
%
Total
$
899
-
%
$
-
-
%
$
899
-
%
Term Extension
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
CRE owner occupied
$
1,754
0.12
%
$
-
-
%
$
1,754
0.06
%
Commercial and industrial
3,705
0.09
%
-
-
%
3,705
0.06
%
Construction
-
-
%
3,518
0.65
%
3,518
0.50
%
Mortgage
14,521
0.24
%
1,853
0.14
%
16,374
0.22
%
Consumer:
26
-
%
54
0.02
%
80
-
%
Total
$
20,006
0.09
%
$
5,425
0.06
%
$
25,431
0.08
%
Other-Than-Insignificant Payment Delays
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
CRE non-owner occupied
$
1,751
0.06
%
$
-
-
%
$
1,751
0.04
%
CRE owner occupied
13,156
0.88
%
13,744
0.90
%
26,900
0.89
%
Commercial and industrial
1,411
0.04
%
864
0.04
%
2,275
0.04
%
Consumer:
33
0.03
%
-
-
%
33
0.02
%
Total
$
16,351
0.07
%
$
14,608
0.15
%
$
30,959
0.10
%
Combination - Term extension and Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
CRE owner occupied
$
101
0.01
%
$
-
-
%
$
101
-
%
Mortgage
10,473
0.17
%
328
0.03
%
10,801
0.15
%
Consumer:
422
0.03
%
-
-
%
422
0.02
%
29
-
%
-
-
%
29
-
%
Total
$
11,025
0.05
%
$
328
-
%
$
11,353
0.04
%
45
The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulties:
For the quarter ended March 31, 2024
Interest rate reduction
Loan Type
Financial Effect
CRE Non-owner occupied
Reduced weighted-average contractual interest rate from
10.13
% to
8.25
%.
Commercial and industrial
Reduced weighted-average contractual interest rate from
25.53
% to
9.83
%.
Mortgage
Reduced weighted-average contractual interest rate from
5.88
% to
4.5
0%.
Consumer:
Credit cards
Reduced weighted-average contractual interest rate from
21.05
% to
6.23
%.
Personal
Reduced weighted-average contractual interest rate from
18.06
% to
9.68
%.
Term extension
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
1
CRE Owner occupied
Added a weighted-average of
6
Commercial and industrial
Added a weighted-average of
9
Mortgage
Added a weighted-average of
12
Consumer:
Personal
Added a weighted-average of
11
Other than insignificant payment delay
Loan Type
Financial Effect
CRE Owner occupied
Added a weighted-average of
12
Commercial and industrial
Added a weighted-average of
8
Consumer:
Credit cards
Added a weighted-average of
23
46
For the quarter ended March 31, 2023
Interest rate reduction
Loan Type
Financial Effect
CRE Owner occupied
Reduced weighted-average contractual interest rate from
6.00
% to
5.25
%.
Mortgage
Reduced weighted-average contractual interest rate from
5.69
% to
4.17
%.
Consumer:
Credit cards
Reduced weighted-average contractual interest rate from
17.76
% to
4.47
%.
Personal
Reduced weighted-average contractual interest rate from
16.97
% to
9.11
%.
Auto
Reduced weighted-average contractual interest rate from
12.64
% to
12.62
%.
Other
Reduced weighted-average contractual interest rate from
17.99
% to
0
%.
Term extension
Loan Type
Financial Effect
CRE Owner occupied
Added a weighted-average of
2
Commercial and industrial
Added a weighted-average of
5
Construction
Added a weighted-average of
6
Mortgage
Added a weighted-average of
10
Consumer:
Personal
Added a weighted-average of
6
Auto
Added a weighted-average of
2
Other than insignificant payment delay
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
12
CRE Owner occupied
Added a weighted-average of
7
Commercial and industrial
Added a weighted-average of
9
Consumer:
Other
Added a weighted-average of
11
47
The following tables present, by class, the performance of loans that have been modified during the twelve months preceding March
31, 2024.
modification. These loans will continue in non-accrual status, and presented as past due 90 days or more, until the borrower has
demonstrated a willingness and ability to make the restructured loan payments (at least six months of sustained performance after
the modification or one year for loans providing for quarterly or semi-annual payments) and management has concluded that it is
probable that the borrower would not be in payment default in the foreseeable future.
BPPR
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
Commercial multi-family
$
-
$
-
$
65
$
65
$
-
$
65
$
-
$
65
CRE non-owner occupied
179
3,278
2,918
6,375
60,491
66,866
-
2,918
CRE owner occupied
811
-
1,969
2,780
189,327
192,107
537
1,432
Commercial and industrial
626
-
16,492
17,118
32,511
49,629
2,774
13,718
Mortgage
5,970
3,954
23,151
33,075
49,225
82,300
3,525
19,626
Consumer:
126
31
223
380
1,017
1,397
159
64
42
105
1,058
1,205
3,071
4,276
51
1,007
-
-
13
13
71
84
-
13
-
-
-
-
3
3
-
-
Total
$
7,754
$
7,368
$
45,889
$
61,011
$
335,716
$
396,727
$
7,046
$
38,843
[1] Loans that were in non-accrual status at the time of modification are presented as past due until the borrower has demonstrated a willingness and ability
to make the restructured loan payments. Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded investment as of period end is inclusive of all partial paydowns and charge-offs since the modification
date. Loans modified with financial difficulty that were fully paid down, charged-off or foreclosed upon by period end are not reported.
Popular U.S.
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE owner occupied
$
-
$
-
$
-
$
-
$
57,550
$
57,550
$
-
$
-
Mortgage
-
-
324
324
3,403
3,727
-
324
Consumer:
-
-
160
160
124
284
-
160
Total
$
-
$
-
$
484
$
484
$
61,077
$
61,561
$
-
$
484
[1] Loans that were in non-accrual status at the time of modification are presented as past due until the borrower has demonstrated a willingness and ability
to make the restructured loan payments. Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded investment as of period end is inclusive of all partial paydowns and charge-offs since the modification
date. Loans modified with financial difficulty that were fully paid down, charged-off or foreclosed upon by period end are not reported.
48
Popular Inc.
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
Commercial multi-family
$
-
$
-
$
65
$
65
$
-
$
65
$
-
$
65
CRE non-owner occupied
179
3,278
2,918
6,375
60,491
66,866
-
2,918
CRE owner occupied
811
-
1,969
2,780
246,877
249,657
537
1,432
Commercial and industrial
626
-
16,492
17,118
32,511
49,629
2,774
13,718
Mortgage
5,970
3,954
23,475
33,399
52,628
86,027
3,525
19,950
Consumer:
126
31
223
380
1,017
1,397
159
64
42
105
1,218
1,365
3,195
4,560
51
1,167
-
-
13
13
71
84
-
13
-
-
-
-
3
3
-
-
Total
$
7,754
$
7,368
$
46,373
$
61,495
$
396,793
$
458,288
$
7,046
$
39,327
[1] Loans that were in non-accrual status at the time of modification are presented as past due until the borrower has demonstrated a willingness and ability
to make the restructured loan payments. Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded inve stment as of period end is inclusive of all partial paydowns and charge-offs since the modification
date. Loans modified with financial difficulty that were fully paid down, charged-off or foreclosed upon by period end are not reported.
49
The following tables present, by class, the performance of loans that have been modified during the quarter ended March 31, 2023.
BPPR
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE non-owner occupied
$
-
$
-
$
-
$
-
$
1,751
$
1,751
$
-
$
-
CRE owner occupied
-
-
1,803
1,803
13,208
15,011
209
1,594
Commercial and industrial
-
-
142
142
4,974
5,116
28
114
Mortgage
1,202
180
7,518
8,900
16,321
25,221
-
7,518
Consumer:
21
46
96
163
334
497
96
-
6
-
232
238
382
620
-
232
-
-
-
-
29
29
-
-
-
-
33
33
3
36
-
33
Total
$
1,229
$
226
$
9,824
$
11,279
$
37,002
$
48,281
$
333
$
9,491
[1] Loans that were in non-accrual status at the time of modification are presented as past due until the borrower has demonstrated a willingness and ability
to make the restructured loan payments. Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded investment as of period end is inclusive of all partial paydowns and charge-offs since the modification
date. Loans modified with financial difficulty that were fully paid down, charged-off or foreclosed upon by period end are not reported.
Popular U.S.
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE owner occupied
$
-
$
-
$
-
$
-
$
13,744
$
13,744
$
-
$
-
Commercial and industrial
-
-
-
-
864
864
-
-
Construction
-
-
-
-
3,518
3,518
-
-
Mortgage
-
-
104
104
2,077
2,181
-
104
Consumer:
-
-
54
54
-
54
-
54
Total
$
-
$
-
$
158
$
158
$
20,203
$
20,361
$
-
$
158
[1] Loans that were in non-accrual status at the time of modification are presented as past due until the borrower has demonstrated a willingness and ability
to make the restructured loan payments. Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded investment as of period end is inclusive of all partial paydowns and charge-offs since the modification
date. Loans modified with financial difficulty that were fully paid down, charged-off or foreclosed upon by period end are not reported.
50
Popular Inc.
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE non-owner occupied
$
-
$
-
$
-
$
-
$
1,751
$
1,751
$
-
$
-
CRE owner occupied
-
-
1,803
1,803
26,952
28,755
209
1,594
Commercial and industrial
-
-
142
142
5,838
5,980
28
114
Construction
-
-
-
-
3,518
3,518
-
-
Mortgage
1,202
180
7,622
9,004
18,398
27,402
-
7,622
Consumer:
21
46
96
163
334
497
96
-
6
-
286
292
382
674
-
286
-
-
-
-
29
29
-
-
-
-
33
33
3
36
-
33
Total
$
1,229
$
226
$
9,982
$
11,437
$
57,205
$
68,642
$
333
$
9,649
[1] Loans that were in non-accrual status at the time of modification are presented as past due until the borrower has demonstrated a willingness and ability
to make the restructured loan payments. Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded inve stment as of period end is inclusive of all partial paydowns and charge-offs since the modification
date. Loans modified with financial difficulty that were fully paid down, charged-off or foreclosed upon by period end are not reported.
Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or charged-off,
whichever occurs first. During the quarter ended March 31,2024, the outstanding balance of loans modified for borrowers under
financial difficulties that were subject to payment default and that had been modified during the twelve months preceding the default
date was $
21
For the quarter ended March 31,2024, extension of maturity and the combination of interest rate reduction and extension of maturity
amounted to $
20
1
difficulties that were subject to payment default during the year preceding the default date.
Credit Quality
The risk rating system provides for the assignment of ratings at the obligor level based on the financial condition of the borrower.
The risk rating analysis process is performed at least once a year or more frequently if events or conditions change which may
deteriorate the credit quality. In the case of consumer and mortgage loans, these loans are classified considering their delinquency
status at the end of the reporting period.
The following tables present the amortized cost basis, net of unearned income, of loans held-in-portfolio based on the Corporation’s
assignment of obligor risk ratings as defined at March 31, 2024 and December 31, 2023 and the gross write-offs recorded by
vintage year. For the definitions of the obligor risk ratings, refer to the Credit Quality section of Note 9 to the Consolidated Financial
Statements included in the 2023 Form 10-K:
51
March 31, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
BPPR
Commercial:
Commercial multi-family
Pass
$
41,585
$
37,808
$
138,013
$
21,271
$
20,401
$
28,387
$
-
$
-
$
287,465
Watch
-
-
-
-
-
6,112
-
-
6,112
Special Mention
-
-
554
-
-
4,743
-
-
5,297
Substandard
-
-
-
-
-
4,777
-
-
4,777
Total commercial
multi-family
$
41,585
$
37,808
$
138,567
$
21,271
$
20,401
$
44,019
$
-
$
-
$
303,651
Commercial real estate non-owner occupied
Pass
$
24,000
$
308,584
$
854,075
$
558,216
$
356,421
$
594,172
$
3,896
$
-
$
2,699,364
Watch
-
2,590
727
5,144
21,840
39,832
-
-
70,133
Special Mention
-
42,111
6,879
24,626
-
73,034
-
-
146,650
Substandard
-
1,011
1,260
179
2,164
71,074
4,650
-
80,338
Total commercial
real estate non-
owner occupied
$
24,000
$
354,296
$
862,941
$
588,165
$
380,425
$
778,112
$
8,546
$
-
$
2,996,485
Commercial real estate owner occupied
Pass
$
56,699
$
94,564
$
154,134
$
224,909
$
49,919
$
369,657
$
8,083
$
-
$
957,965
Watch
249
1,965
44,450
9,048
4,556
61,509
1,003
-
122,780
Special Mention
-
942
21,683
20,611
1,101
41,356
-
-
85,693
Substandard
161
1,238
15,848
4,962
142,903
80,416
14,017
-
259,545
Doubtful
-
-
-
-
-
109
-
-
109
Total commercial
real estate owner
occupied
$
57,109
$
98,709
$
236,115
$
259,530
$
198,479
$
553,047
$
23,103
$
-
$
1,426,092
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
2,785
$
-
$
-
$
2,785
Commercial and industrial
Pass
$
142,966
$
975,917
$
627,072
$
339,891
$
236,641
$
368,158
$
1,202,822
$
-
$
3,893,467
Watch
4,012
66,951
55,844
162,005
3,730
77,782
216,159
-
586,483
Special Mention
423
5,472
36,829
260
2,867
41,837
73,721
-
161,409
Substandard
418
1,051
2,182
8,570
15,962
31,756
43,282
-
103,221
Doubtful
-
-
-
-
54
32
-
-
86
Loss
-
-
-
-
-
-
457
-
457
Total commercial
and industrial
$
147,819
$
1,049,391
$
721,927
$
510,726
$
259,254
$
519,565
$
1,536,441
$
-
$
4,745,123
Year-to-Date gross
write-offs
$
124
$
-
$
58
$
-
$
24
$
5,131
$
1,332
$
-
$
6,669
Construction
Pass
$
-
$
29,488
$
24,618
$
19,243
$
10,696
$
1,766
$
37,970
$
-
$
123,781
Watch
-
-
17,187
11,801
-
-
$
8,917
-
37,905
Special Mention
-
-
-
1,038
-
-
-
-
1,038
Total construction
$
-
$
29,488
$
41,805
$
32,082
$
10,696
$
1,766
$
46,887
$
-
$
162,724
Mortgage
Pass
$
192,679
$
759,057
$
432,327
$
415,791
$
255,350
$
4,355,912
$
-
$
-
$
6,411,116
Substandard
-
1,181
319
379
350
70,206
-
-
72,435
Total mortgage
$
192,679
$
760,238
$
432,646
$
416,170
$
255,700
$
4,426,118
$
-
$
-
$
6,483,551
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
765
$
-
$
-
$
765
52
March 31, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
BPPR
Leasing
Pass
$
210,843
$
570,183
$
456,718
$
287,444
$
148,154
$
84,804
$
-
$
-
$
1,758,146
Substandard
-
902
1,980
2,580
578
1,129
-
-
7,169
Loss
-
81
-
-
-
17
-
-
98
Total leasing
$
210,843
$
571,166
$
458,698
$
290,024
$
148,732
$
85,950
$
-
$
-
$
1,765,413
Year-to-Date gross
write-offs
$
42
$
1,071
$
1,966
$
1,082
$
238
$
451
$
-
$
-
$
4,850
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
1,118,278
$
-
$
1,118,278
Substandard
-
-
-
-
-
-
23,837
-
23,837
Loss
-
-
-
-
-
-
21
-
21
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,142,136
$
-
$
1,142,136
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
16,396
$
-
$
16,396
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
2,562
$
-
$
2,562
Substandard
-
-
-
-
-
-
7
-
7
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
-
$
2,569
$
-
$
2,569
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
197
$
-
$
197
Personal
Pass
$
200,218
$
745,798
$
417,333
$
158,860
$
48,662
$
134,930
$
-
$
21,077
$
1,726,878
Substandard
-
2,864
4,243
1,551
472
9,452
-
1,033
19,615
Total Personal
$
200,218
$
748,662
$
421,576
$
160,411
$
49,134
$
144,382
$
-
$
22,110
$
1,746,493
Year-to-Date gross
write-offs
$
-
$
6,810
$
11,488
$
3,295
$
880
$
1,403
$
-
$
473
$
24,349
Auto
Pass
$
342,983
$
1,145,262
$
840,316
$
654,624
$
366,598
$
307,952
$
-
$
-
$
3,657,735
Substandard
119
9,989
12,762
10,704
7,415
8,008
-
-
48,997
Loss
-
68
27
19
-
8
-
-
122
Total Auto
$
343,102
$
1,155,319
$
853,105
$
665,347
$
374,013
$
315,968
$
-
$
-
$
3,706,854
Year-to-Date gross
write-offs
$
114
$
9,028
$
5,738
$
3,008
$
1,521
$
758
$
-
$
-
$
20,167
Other consumer
Pass
$
8,302
$
35,338
$
22,941
$
13,787
$
5,252
$
5,716
$
61,379
$
-
$
152,715
Substandard
-
244
24
-
44
81
307
-
700
Loss
-
-
-
-
-
263
-
-
263
Total Other
consumer
$
8,302
$
35,582
$
22,965
$
13,787
$
5,296
$
6,060
$
61,686
$
-
$
153,678
Year-to-Date gross
write-offs
$
-
$
34
$
50
$
29
$
93
$
458
$
-
$
-
$
664
Total BPPR
$
1,225,657
$
4,840,659
$
4,190,345
$
2,957,513
$
1,702,130
$
6,874,987
$
2,821,368
$
22,110
$
24,634,769
53
March 31, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular U.S.
Commercial:
Commercial multi-family
Pass
$
34
$
165,837
$
436,312
$
341,089
$
165,978
$
592,171
$
5,334
$
-
$
1,706,755
Watch
-
-
101,958
19,914
67,303
149,375
-
-
338,550
Special Mention
-
-
-
858
-
2,192
-
-
3,050
Substandard
-
-
-
-
-
32,629
-
-
32,629
Total commercial
multi-family
$
34
$
165,837
$
538,270
$
361,861
$
233,281
$
776,367
$
5,334
$
-
$
2,080,984
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
441
$
-
$
-
$
441
Commercial real estate non-owner occupied
Pass
$
6,741
$
396,376
$
493,557
$
168,986
$
214,339
$
503,436
$
11,254
$
-
$
1,794,689
Watch
-
-
17,023
33,260
29,093
94,339
-
-
173,715
Special Mention
-
-
-
2,406
-
64,664
-
-
67,070
Substandard
-
-
2,708
2,790
7,995
11,607
-
-
25,100
Total commercial
real estate non-
owner occupied
$
6,741
$
396,376
$
513,288
$
207,442
$
251,427
$
674,046
$
11,254
$
-
$
2,060,574
Commercial real estate owner occupied
Pass
$
36,651
$
302,989
$
245,911
$
225,998
$
57,688
$
250,846
$
4,951
$
-
$
1,125,034
Watch
-
-
38,795
27,687
51,281
102,480
3,972
-
224,215
Special Mention
-
-
34,633
131,309
4,922
11,152
-
-
182,016
Substandard
-
-
28,593
2,413
-
129,481
-
-
160,487
Total commercial
real estate owner
occupied
$
36,651
$
302,989
$
347,932
$
387,407
$
113,891
$
493,959
$
8,923
$
-
$
1,691,752
Commercial and industrial
Pass
$
41,163
$
218,204
$
301,833
$
337,350
$
249,043
$
511,963
$
310,873
$
-
$
1,970,429
Watch
25
184
39,927
46,133
57,607
112,073
20,338
-
276,287
Special Mention
-
196
6,065
902
21
433
14,865
-
22,482
Substandard
914
1,057
427
132
2,779
2,214
3,639
-
11,162
Total commercial
and industrial
$
42,102
$
219,641
$
348,252
$
384,517
$
309,450
$
626,683
$
349,715
$
-
$
2,280,360
Year-to-Date gross
write-offs
$
-
$
-
$
190
$
272
$
5
$
44
$
53
$
-
$
564
Construction
Pass
$
17,234
$
348,577
$
230,756
$
82,615
$
-
$
38,754
$
15,733
$
-
$
733,669
Watch
-
-
31,690
14,210
-
8,118
-
-
54,018
Special Mention
-
2,168
13,466
-
-
-
-
-
15,634
Substandard
-
-
-
8,825
-
-
34,433
-
43,258
Total construction
$
17,234
$
350,745
$
275,912
$
105,650
$
-
$
46,872
$
50,166
$
-
$
846,579
Mortgage
Pass
$
23,480
$
93,943
$
225,010
$
283,981
$
230,999
$
414,626
$
-
$
-
$
1,272,039
Substandard
-
-
235
-
645
27,192
-
-
28,072
Total mortgage
$
23,480
$
93,943
$
225,245
$
283,981
$
231,644
$
441,818
$
-
$
-
$
1,300,111
54
March 31, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular U.S.
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
17
$
-
$
17
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
17
$
-
$
17
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
6,878
$
40,955
$
12,329
$
60,162
Substandard
-
-
-
-
-
1,816
-
1,280
3,096
Loss
-
-
-
-
-
99
-
791
890
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
8,793
$
40,955
$
14,400
$
64,148
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
7
$
-
$
-
$
7
Personal
Pass
$
8,545
$
36,778
$
78,649
$
18,867
$
2,167
$
3,441
$
-
$
-
$
148,447
Substandard
-
506
956
201
40
366
-
-
2,069
Loss
-
-
-
-
-
1
-
-
1
Total Personal
$
8,545
$
37,284
$
79,605
$
19,068
$
2,207
$
3,808
$
-
$
-
$
150,517
Year-to-Date gross
write-offs
$
-
$
545
$
3,701
$
873
$
62
$
531
$
-
$
-
$
5,712
Other consumer
Pass
$
18
$
-
$
-
$
-
$
-
$
-
$
8,908
$
-
$
8,926
Loss
-
-
-
-
-
-
1
-
1
Total Other
consumer
$
18
$
-
$
-
$
-
$
-
$
-
$
8,909
$
-
$
8,927
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
31
$
-
$
31
Total Popular U.S.
$
134,805
$
1,566,815
$
2,328,504
$
1,749,926
$
1,141,900
$
3,072,346
$
475,273
$
14,400
$
10,483,969
55
March 31, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular, Inc.
Commercial:
Commercial multi-family
Pass
$
41,619
$
203,645
$
574,325
$
362,360
$
186,379
$
620,558
$
5,334
$
-
$
1,994,220
Watch
-
-
101,958
19,914
67,303
155,487
-
-
344,662
Special Mention
-
-
554
858
-
6,935
-
-
8,347
Substandard
-
-
-
-
-
37,406
-
-
37,406
Total commercial
multi-family
$
41,619
$
203,645
$
676,837
$
383,132
$
253,682
$
820,386
$
5,334
$
-
$
2,384,635
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
441
$
-
$
-
$
441
Commercial real estate non-owner occupied
Pass
$
30,741
$
704,960
$
1,347,632
$
727,202
$
570,760
$
1,097,608
$
15,150
$
-
$
4,494,053
Watch
-
2,590
17,750
38,404
50,933
134,171
-
-
243,848
Special Mention
-
42,111
6,879
27,032
-
137,698
-
-
213,720
Substandard
-
1,011
3,968
2,969
10,159
82,681
4,650
-
105,438
Total commercial
real estate non-
owner occupied
$
30,741
$
750,672
$
1,376,229
$
795,607
$
631,852
$
1,452,158
$
19,800
$
-
$
5,057,059
Commercial real estate owner occupied
Pass
$
93,350
$
397,553
$
400,045
$
450,907
$
107,607
$
620,503
$
13,034
$
-
$
2,082,999
Watch
249
1,965
83,245
36,735
55,837
163,989
4,975
-
346,995
Special Mention
-
942
56,316
151,920
6,023
52,508
-
-
267,709
Substandard
161
1,238
44,441
7,375
142,903
209,897
14,017
-
420,032
Doubtful
-
-
-
-
-
109
-
-
109
Total commercial
real estate owner
occupied
$
93,760
$
401,698
$
584,047
$
646,937
$
312,370
$
1,047,006
$
32,026
$
-
$
3,117,844
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
2,785
$
-
$
-
$
2,785
Commercial and industrial
Pass
$
184,129
$
1,194,121
$
928,905
$
677,241
$
485,684
$
880,121
$
1,513,695
$
-
$
5,863,896
Watch
4,037
67,135
95,771
$
208,138
$
61,337
$
189,855
$
236,497
$
-
$
862,770
Special Mention
423
5,668
42,894
1,162
2,888
42,270
88,586
-
183,891
Substandard
1,332
2,108
2,609
8,702
18,741
33,970
46,921
-
114,383
Doubtful
-
-
-
-
54
32
-
-
86
Loss
-
-
-
-
-
-
457
-
457
Total commercial
and industrial
$
189,921
$
1,269,032
$
1,070,179
$
895,243
$
568,704
$
1,146,248
$
1,886,156
$
-
$
7,025,483
Year-to-Date gross
write-offs
$
124
$
-
$
248
$
272
$
29
$
5,175
$
1,385
$
-
$
7,233
56
March 31, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular, Inc.
Construction
Pass
$
17,234
$
378,065
$
255,374
$
101,858
$
10,696
$
40,520
$
53,703
$
-
$
857,450
Watch
-
-
48,877
26,011
-
8,118
8,917
-
91,923
Special Mention
-
2,168
13,466
1,038
-
-
-
-
16,672
Substandard
-
-
-
8,825
-
-
34,433
-
43,258
Total construction
$
17,234
$
380,233
$
317,717
$
137,732
$
10,696
$
48,638
$
97,053
$
-
$
1,009,303
Mortgage
Pass
$
216,159
$
853,000
$
657,337
$
699,772
$
486,349
$
4,770,538
$
-
$
-
$
7,683,155
Substandard
-
1,181
554
379
995
97,398
-
-
100,507
Total mortgage
$
216,159
$
854,181
$
657,891
$
700,151
$
487,344
$
4,867,936
$
-
$
-
$
7,783,662
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
765
$
-
$
-
$
765
Leasing
Pass
$
210,843
$
570,183
$
456,718
$
287,444
$
148,154
$
84,804
$
-
$
-
$
1,758,146
Substandard
-
902
1,980
2,580
578
1,129
-
-
7,169
Loss
-
81
-
-
-
17
-
-
98
Total leasing
$
210,843
$
571,166
$
458,698
$
290,024
$
148,732
$
85,950
$
-
$
-
$
1,765,413
Year-to-Date gross
write-offs
$
42
$
1,071
$
1,966
$
1,082
$
238
$
451
$
-
$
-
$
4,850
57
March 31, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular, Inc.
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
1,118,295
$
-
$
1,118,295
Substandard
-
-
-
-
-
-
23,837
-
23,837
Loss
-
-
-
-
-
-
21
-
21
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,142,153
$
-
$
1,142,153
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
16,396
$
-
$
16,396
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
6,878
$
43,517
$
12,329
$
62,724
Substandard
-
-
-
-
-
1,816
7
1,280
3,103
Loss
-
-
-
-
-
99
-
791
890
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
8,793
$
43,524
$
14,400
$
66,717
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
7
$
197
$
-
$
204
Personal
Pass
$
208,763
$
782,576
$
495,982
$
177,727
$
50,829
$
138,371
$
-
$
21,077
$
1,875,325
Substandard
-
3,370
5,199
1,752
512
9,818
-
1,033
21,684
Loss
-
-
-
-
-
1
-
-
1
Total Personal
$
208,763
$
785,946
$
501,181
$
179,479
$
51,341
$
148,190
$
-
$
22,110
$
1,897,010
Year-to-Date gross
write-offs
$
-
$
7,355
$
15,189
$
4,168
$
942
$
1,934
$
-
$
473
$
30,061
Auto
Pass
$
342,983
$
1,145,262
$
840,316
$
654,624
$
366,598
$
307,952
$
-
$
-
$
3,657,735
Substandard
119
9,989
12,762
10,704
7,415
8,008
-
-
48,997
Loss
-
68
27
19
-
8
-
-
122
Total Auto
$
343,102
$
1,155,319
$
853,105
$
665,347
$
374,013
$
315,968
$
-
$
-
$
3,706,854
Year-to-Date gross
write-offs
$
114
$
9,028
$
5,738
$
3,008
$
1,521
$
758
$
-
$
-
$
20,167
Other consumer
Pass
$
8,320
$
35,338
$
22,941
$
13,787
$
5,252
$
5,716
$
70,287
$
-
$
161,641
Substandard
-
244
24
-
44
81
307
-
700
Loss
-
-
-
-
-
263
1
-
264
Total Other
consumer
$
8,320
$
35,582
$
22,965
$
13,787
$
5,296
$
6,060
$
70,595
$
-
$
162,605
Year-to-Date gross
write-offs
$
-
$
34
$
50
$
29
$
93
$
458
$
31
$
-
$
695
Total Popular Inc.
$
1,360,462
$
6,407,474
$
6,518,849
$
4,707,439
$
2,844,030
$
9,947,333
$
3,296,641
$
36,510
$
35,118,738
58
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
BPPR
Commercial:
Commercial multi-family
Pass
$
37,976
$
138,619
$
21,334
$
20,487
$
32,554
$
24,248
$
306
$
-
$
275,524
Watch
-
-
-
-
1,068
5,179
-
-
6,247
Special Mention
-
559
-
-
-
4,780
-
-
5,339
Substandard
-
-
-
-
-
4,832
-
-
4,832
Total commercial
multi-family
$
37,976
$
139,178
$
21,334
$
20,487
$
33,622
$
39,039
$
306
$
-
$
291,942
Commercial real estate non-owner occupied
Pass
$
305,243
$
871,191
$
560,785
$
359,853
$
41,262
$
563,794
$
7,042
$
-
$
2,709,170
Watch
1,959
882
5,205
22,211
5,938
27,015
-
-
63,210
Special Mention
43,020
5,413
24,730
-
15,843
68,368
-
-
157,374
Substandard
1,016
1,307
180
2,231
53,729
12,968
4,069
-
75,500
Total commercial
real estate non-
owner occupied
$
351,238
$
878,793
$
590,900
$
384,295
$
116,772
$
672,145
$
11,111
$
-
$
3,005,254
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
609
$
-
$
521
$
-
$
-
$
1,130
Commercial real estate owner occupied
Pass
$
92,234
$
155,819
$
227,246
$
51,038
$
24,184
$
357,429
$
9,146
$
-
$
917,096
Watch
2,947
45,106
9,913
4,285
5,017
62,217
1,000
-
130,485
Special Mention
-
16,860
20,741
1,462
887
44,069
-
-
84,019
Substandard
1,316
15,710
5,080
143,696
845
87,383
12,617
-
266,647
Doubtful
-
-
-
-
-
136
-
-
136
Total commercial
real estate owner
occupied
$
96,497
$
233,495
$
262,980
$
200,481
$
30,933
$
551,234
$
22,763
$
-
$
1,398,383
Year-to-Date gross
write-offs
$
-
$
4
$
-
$
-
$
1
$
4,432
$
-
$
-
$
4,437
Commercial and industrial
Pass
$
1,109,898
$
634,401
$
511,912
$
241,452
$
123,458
$
258,872
$
1,343,885
$
-
$
4,223,878
Watch
28,841
95,785
6,111
4,043
15,560
65,360
182,756
-
398,456
Special Mention
6,401
3,269
276
3,200
2,088
41,289
9,410
-
65,933
Substandard
731
1,760
8,644
22,065
1,922
32,087
40,670
-
107,879
Doubtful
-
-
-
54
-
26
-
-
80
Total commercial
and industrial
$
1,145,871
$
735,215
$
526,943
$
270,814
$
143,028
$
397,634
$
1,576,721
$
-
$
4,796,226
Year-to-Date gross
write-offs
$
896
$
184
$
215
$
335
$
555
$
1,086
$
4,468
$
-
$
7,739
Construction
Pass
$
26,662
$
24,462
$
27,364
$
10,758
$
1,944
$
1,049
$
38,720
$
-
$
130,959
Watch
-
16,546
5,458
-
-
-
9,506
-
31,510
Special Mention
-
-
1,009
-
-
-
1
-
1,010
Substandard
-
6,378
-
-
-
-
-
-
6,378
Total construction
$
26,662
$
47,386
$
33,831
$
10,758
$
1,944
$
1,049
$
48,227
$
-
$
169,857
Year-to-Date gross
write-offs
$
-
$
2,611
$
-
$
-
$
-
$
-
$
-
$
-
$
2,611
Mortgage
Pass
$
751,532
$
439,373
$
421,297
$
259,412
$
164,438
$
4,280,509
$
-
$
-
$
6,316,561
Substandard
$
96
$
161
$
162
$
345
$
2,606
$
71,893
$
-
$
-
$
75,263
Total mortgage
$
751,628
$
439,534
$
421,459
$
259,757
$
167,044
$
4,352,402
$
-
$
-
$
6,391,824
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
1,638
$
-
$
-
$
1,638
59
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
BPPR
Leasing
Pass
$
647,659
$
488,506
$
313,133
$
163,189
$
88,983
$
21,706
$
-
$
-
$
1,723,176
Substandard
806
2,516
3,053
906
818
517
-
-
8,616
Loss
-
-
-
-
-
17
-
-
17
Total leasing
$
648,465
$
491,022
$
316,186
$
164,095
$
89,801
$
22,240
$
-
$
-
$
1,731,809
Year-to-Date gross
write-offs
$
1,065
$
4,424
$
2,878
$
849
$
976
$
687
$
-
$
-
$
10,879
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
1,112,447
$
-
$
1,112,447
Substandard
-
-
-
-
-
-
23,259
-
23,259
Loss
-
-
-
-
-
-
22
-
22
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,135,728
$
-
$
1,135,728
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
41,007
$
-
$
41,007
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
2,622
$
-
$
2,622
Substandard
-
-
-
-
-
-
26
-
26
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
-
$
2,648
$
-
$
2,648
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
213
$
-
$
213
Personal
Pass
$
859,434
$
480,771
$
181,483
$
57,227
$
58,849
$
96,956
$
-
$
22,034
$
1,756,754
Substandard
1,815
4,985
1,939
493
933
8,322
-
1,006
19,493
Loss
-
-
14
-
12
37
-
-
63
Total Personal
$
861,249
$
485,756
$
183,436
$
57,720
$
59,794
$
105,315
$
-
$
23,040
$
1,776,310
Year-to-Date gross
write-offs
$
4,458
$
35,915
$
18,076
$
4,210
$
4,891
$
2,952
$
-
$
1,475
$
71,977
Auto
Pass
$
1,210,622
$
899,797
$
711,439
$
405,768
$
260,355
$
120,318
$
-
$
-
$
3,608,299
Substandard
6,980
14,049
11,916
9,157
7,051
3,199
-
-
52,352
Loss
9
44
45
16
9
6
-
-
129
Total Auto
$
1,217,611
$
913,890
$
723,400
$
414,941
$
267,415
$
123,523
$
-
$
-
$
3,660,780
Year-to-Date gross
write-offs
$
10,170
$
23,849
$
11,820
$
5,914
$
3,553
$
-
$
-
$
-
$
55,306
Other consumer
Pass
$
36,144
$
24,238
$
14,942
$
5,618
$
3,433
$
2,753
$
61,796
$
-
$
148,924
Substandard
244
25
-
73
16
131
249
-
738
Loss
-
-
137
-
-
363
-
-
500
Total Other
consumer
$
36,388
$
24,263
$
15,079
$
5,691
$
3,449
$
3,247
$
62,045
$
-
$
150,162
Year-to-Date gross
write-offs
$
47
$
154
$
125
$
164
$
88
$
11,876
$
-
$
-
$
12,454
Total BPPR
$
5,173,585
$
4,388,532
$
3,095,548
$
1,789,039
$
913,802
$
6,267,828
$
2,859,549
$
23,040
$
24,510,923
60
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular U.S.
Commercial:
Commercial multi-family
Pass
$
166,410
$
417,169
$
326,047
$
164,887
$
182,528
$
410,836
$
5,112
$
-
$
1,672,989
Watch
-
116,794
39,319
71,237
93,239
98,365
-
-
418,954
Special Mention
-
-
862
1,171
-
3,377
-
-
5,410
Substandard
-
-
-
-
5,545
20,780
-
-
26,325
Total commercial
multi-family
$
166,410
$
533,963
$
366,228
$
237,295
$
281,312
$
533,358
$
5,112
$
-
$
2,123,678
Commercial real estate non-owner occupied
Pass
$
396,712
$
490,316
$
170,074
$
201,225
$
86,595
$
394,455
$
6,086
$
-
$
1,745,463
Watch
-
39,721
38,713
43,705
39,908
91,922
4,557
-
258,526
Special Mention
-
-
-
-
1,327
63,365
-
-
64,692
Substandard
-
-
-
8,054
1,702
3,730
-
-
13,486
Total commercial
real estate non-
owner occupied
$
396,712
$
530,037
$
208,787
$
252,984
$
129,532
$
553,472
$
10,643
$
-
$
2,082,167
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
193
$
-
$
-
$
193
Commercial real estate owner occupied
Pass
$
303,202
$
278,380
$
226,289
$
58,505
$
47,083
$
204,888
$
9,753
$
-
$
1,128,100
Watch
-
69,894
84,218
53,066
14,057
98,502
1,905
-
321,642
Special Mention
-
-
77,912
4,955
6,074
11,224
-
-
100,165
Substandard
-
477
2,430
-
21,763
107,675
-
-
132,345
Total commercial
real estate owner
occupied
$
303,202
$
348,751
$
390,849
$
116,526
$
88,977
$
422,289
$
11,658
$
-
$
1,682,252
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
1,395
$
-
$
-
$
1,395
61
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular U.S.
Commercial and industrial
Pass
$
196,959
$
278,238
$
346,428
$
268,835
$
148,502
$
379,635
$
414,883
$
-
$
2,033,480
Watch
198
37,022
47,299
44,939
23,493
93,299
32,497
-
278,747
Special Mention
208
889
1,021
30
151
39
8,674
-
11,012
Substandard
636
628
152
1,152
730
1,841
1,517
-
6,656
Total commercial
and industrial
$
198,001
$
316,777
$
394,900
$
314,956
$
172,876
$
474,814
$
457,571
$
-
$
2,329,895
Year-to-Date gross
write-offs
$
247
$
221
$
1,994
$
44
$
1,320
$
-
$
49
$
-
$
3,875
Construction
Pass
$
280,188
$
251,627
$
89,450
$
14,733
$
25,254
$
-
$
-
$
-
$
661,252
Watch
-
22,867
12,869
-
21,896
782
-
-
58,414
Special Mention
2,120
13,151
-
-
-
-
-
-
15,271
Substandard
-
1
13,997
3,895
-
36,593
-
-
54,486
Total construction
$
282,308
$
287,646
$
116,316
$
18,628
$
47,150
$
37,375
$
-
$
-
$
789,423
Mortgage
Pass
$
99,296
$
229,720
$
288,767
$
233,805
$
177,245
$
264,069
$
-
$
-
$
1,292,902
Substandard
-
235
-
646
2,102
8,208
-
-
11,191
Total mortgage
$
99,296
$
229,955
$
288,767
$
234,451
$
179,347
$
272,277
$
-
$
-
$
1,304,093
62
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular U.S.
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
19
$
-
$
19
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
19
$
-
$
19
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
1
$
-
$
1
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
7,394
$
39,925
$
12,253
$
59,572
Substandard
-
-
-
-
-
1,849
-
966
2,815
Loss
-
-
-
-
-
99
-
819
918
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
9,342
$
39,925
$
14,038
$
63,305
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
471
$
-
$
-
$
471
Personal
Pass
$
41,016
$
93,759
$
23,325
$
2,993
$
3,597
$
1,441
$
-
$
-
$
166,131
Substandard
333
1,630
325
50
126
211
-
-
2,675
Loss
-
-
-
-
1
130
-
-
131
Total Personal
$
41,349
$
95,389
$
23,650
$
3,043
$
3,724
$
1,782
$
-
$
-
$
168,937
Year-to-Date gross
write-offs
$
735
$
13,136
$
4,450
$
618
$
872
$
160
$
-
$
-
$
19,971
Other consumer
Pass
$
19
$
-
$
-
$
-
$
-
$
-
$
10,259
$
-
$
10,278
Substandard
-
-
-
-
-
-
1
-
1
Total Other
consumer
$
19
$
-
$
-
$
-
$
-
$
-
$
10,260
$
-
$
10,279
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
171
$
-
$
171
Total Popular U.S.
$
1,487,297
$
2,342,518
$
1,789,497
$
1,177,883
$
902,918
$
2,304,709
$
535,188
$
14,038
$
10,554,048
63
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular, Inc.
Commercial:
Commercial multi-family
Pass
$
204,386
$
555,788
$
347,381
$
185,374
$
215,082
$
435,084
$
5,418
$
-
$
1,948,513
Watch
-
116,794
39,319
71,237
94,307
103,544
-
-
425,201
Special Mention
-
559
862
1,171
-
8,157
-
-
10,749
Substandard
-
-
-
-
5,545
25,612
-
-
31,157
Total commercial
multi-family
$
204,386
$
673,141
$
387,562
$
257,782
$
314,934
$
572,397
$
5,418
$
-
$
2,415,620
Commercial real estate non-owner occupied
Pass
$
701,955
$
1,361,507
$
730,859
$
561,078
$
127,857
$
958,249
$
13,128
$
-
$
4,454,633
Watch
1,959
40,603
43,918
65,916
45,846
118,937
4,557
-
321,736
Special Mention
43,020
5,413
24,730
-
17,170
131,733
-
-
222,066
Substandard
1,016
1,307
180
10,285
55,431
16,698
4,069
-
88,986
Total commercial
real estate non-
owner occupied
$
747,950
$
1,408,830
$
799,687
$
637,279
$
246,304
$
1,225,617
$
21,754
$
-
$
5,087,421
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
609
$
-
$
714
$
-
$
-
$
1,323
Commercial real estate owner occupied
Pass
$
395,436
$
434,199
$
453,535
$
109,543
$
71,267
$
562,317
$
18,899
$
-
$
2,045,196
Watch
2,947
115,000
94,131
57,351
19,074
160,719
2,905
-
452,127
Special Mention
-
16,860
98,653
6,417
6,961
55,293
-
-
184,184
Substandard
1,316
16,187
7,510
143,696
22,608
195,058
12,617
-
398,992
Doubtful
-
-
-
-
-
136
-
-
136
Total commercial
real estate owner
occupied
$
399,699
$
582,246
$
653,829
$
317,007
$
119,910
$
973,523
$
34,421
$
-
$
3,080,635
Year-to-Date gross
write-offs
$
-
$
4
$
-
$
-
$
1
$
5,827
$
-
$
-
$
5,832
Commercial and industrial
Pass
$
1,306,857
$
912,639
$
858,340
$
510,287
$
271,960
$
638,507
$
1,758,768
$
-
$
6,257,358
Watch
29,039
132,807
53,410
48,982
39,053
158,659
215,253
-
677,203
Special Mention
6,609
4,158
1,297
3,230
2,239
41,328
18,084
-
76,945
Substandard
1,367
2,388
8,796
23,217
2,652
33,928
42,187
-
114,535
Doubtful
-
-
-
54
-
26
-
-
80
Total commercial
and industrial
$
1,343,872
$
1,051,992
$
921,843
$
585,770
$
315,904
$
872,448
$
2,034,292
$
-
$
7,126,121
Year-to-Date gross
write-offs
$
1,143
$
405
$
2,209
$
379
$
1,875
$
1,086
$
4,517
$
-
$
11,614
64
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular, Inc.
Construction
Pass
$
306,850
$
276,089
$
116,814
$
25,491
$
27,198
$
1,049
$
38,720
$
-
$
792,211
Watch
-
39,413
18,327
-
21,896
782
9,506
-
89,924
Special Mention
2,120
13,151
1,009
-
-
-
1
-
16,281
Substandard
-
6,379
13,997
3,895
-
36,593
-
-
60,864
Total construction
$
308,970
$
335,032
$
150,147
$
29,386
$
49,094
$
38,424
$
48,227
$
-
$
959,280
Year-to-Date gross
write-offs
$
-
$
2,611
$
-
$
-
$
-
$
-
$
-
$
-
$
2,611
Mortgage
Pass
$
850,828
$
669,093
$
710,064
$
493,217
$
341,683
$
4,544,578
$
-
$
-
$
7,609,463
Substandard
96
396
162
991
4,708
80,101
-
-
86,454
Total mortgage
$
850,924
$
669,489
$
710,226
$
494,208
$
346,391
$
4,624,679
$
-
$
-
$
7,695,917
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
1,638
$
-
$
-
$
1,638
Leasing
Pass
$
647,659
$
488,506
$
313,133
$
163,189
$
88,983
$
21,706
$
-
$
-
$
1,723,176
Substandard
806
2,516
3,053
906
818
517
-
-
8,616
Loss
-
-
-
-
-
17
-
-
17
Total leasing
$
648,465
$
491,022
$
316,186
$
164,095
$
89,801
$
22,240
$
-
$
-
$
1,731,809
Year-to-Date gross
write-offs
$
1,065
$
4,424
$
2,878
$
849
$
976
$
687
$
-
$
-
$
10,879
65
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular, Inc.
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
1,112,466
$
-
$
1,112,466
Substandard
-
-
-
-
-
-
23,259
-
23,259
Loss
-
-
-
-
-
-
22
-
22
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,135,747
$
-
$
1,135,747
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
41,008
$
-
$
41,008
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
7,394
$
42,547
$
12,253
$
62,194
Substandard
-
-
-
-
-
1,849
26
966
2,841
Loss
-
-
-
-
-
99
-
819
918
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
9,342
$
42,573
$
14,038
$
65,953
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
471
$
213
$
-
$
684
Personal
Pass
$
900,450
$
574,530
$
204,808
$
60,220
$
62,446
$
98,397
$
-
$
22,034
$
1,922,885
Substandard
2,148
6,615
2,264
543
1,059
8,533
-
1,006
22,168
Loss
$
-
$
-
$
14
$
-
$
13
$
167
$
-
$
-
$
194
Total Personal
$
902,598
$
581,145
$
207,086
$
60,763
$
63,518
$
107,097
$
-
$
23,040
$
1,945,247
Year-to-Date gross
write-offs
$
5,193
$
49,051
$
22,526
$
4,828
$
5,763
$
3,112
$
-
$
1,475
$
91,948
Auto
Pass
$
1,210,622
$
899,797
$
711,439
$
405,768
$
260,355
$
120,318
$
-
$
-
$
3,608,299
Substandard
6,980
14,049
11,916
9,157
7,051
3,199
-
-
52,352
Loss
9
44
45
16
9
6
-
-
129
Total Auto
$
1,217,611
$
913,890
$
723,400
$
414,941
$
267,415
$
123,523
$
-
$
-
$
3,660,780
Year-to-Date gross
write-offs
$
10,170
$
23,849
$
11,820
$
5,914
$
3,553
$
-
$
-
$
-
$
55,306
Other consumer
Pass
$
36,163
$
24,238
$
14,942
$
5,618
$
3,433
$
2,753
$
72,055
$
-
$
159,202
Substandard
244
25
-
73
16
131
250
-
739
Loss
-
-
137
-
-
363
-
-
500
Total Other
consumer
$
36,407
$
24,263
$
15,079
$
5,691
$
3,449
$
3,247
$
72,305
$
-
$
160,441
Year-to-Date gross
write-offs
$
47
$
154
$
125
$
164
$
88
$
11,876
$
171
$
-
$
12,625
Total Popular Inc.
$
6,660,882
$
6,731,050
$
4,885,045
$
2,966,922
$
1,816,720
$
8,572,537
$
3,394,737
$
37,078
$
35,064,971
66
Note 9 – Mortgage banking activities
Income from mortgage banking activities includes mortgage servicing fees earned in connection with administering residential
mortgage loans and valuation adjustments on mortgage servicing rights. It also includes gain on sales and securitizations of
residential mortgage loans, losses on repurchased loans, including interest advances, and trading gains and losses on derivative
contracts used to hedge the Corporation’s securitization activities. In addition, fair value valuation adjustments to residential
mortgage loans held for sale, if any, are recorded as part of the mortgage banking activities.
The following table presents the components of mortgage banking activities:
Quarters ended March 31,
(In thousands)
2024
2023
Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees
$
7,751
$
8,689
Mortgage servicing rights fair value adjustments
(3,439)
(1,376)
Total mortgage servicing fees, net of fair value adjustments
4,312
7,313
Net gain on sale of loans, including valuation on loans held-for-sale
74
263
Trading account profit (loss):
Unrealized gains (loss) on outstanding derivative positions
101
(131)
Realized gains on closed derivative positions
3
56
Total trading account profit (loss)
104
(75)
Losses on repurchased loans, including interest advances
(130)
(101)
Total mortgage banking activities
$
4,360
$
7,400
67
Note 10 – Transfers of financial assets and mortgage servicing assets
The Corporation typically transfers conforming residential mortgage loans in conjunction with GNMA, FNMA and FHLMC
securitization transactions whereby the loans are exchanged for cash or securities and servicing rights. As seller, the Corporation
has made certain representations and warranties with respect to the originally transferred loans and, in the past, has sold certain
loans with credit recourse to a government-sponsored entity, namely FNMA. Refer to Note 19 to the Consolidated Financial
Statements for a description of such arrangements.
No
not contain any credit recourse arrangements. The securitizations completed by the Corporation during the quarters ended March
31, 2024 and 2023 were completed without credit recourse.
The following tables present the initial fair value of the assets obtained as proceeds from residential mortgage loans securitized
during the quarters ended March 31, 2024 and 2023:
Proceeds Obtained During the Quarter Ended March 31, 2024
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA
$
-
$
1,100
$
-
$
1,100
Mortgage-backed securities - FNMA
-
1,105
-
1,105
Total trading account debt securities
$
-
$
2,205
$
-
$
2,205
Mortgage servicing rights
$
-
$
-
$
45
$
45
Total
$
-
$
2,205
$
45
$
2,250
Proceeds Obtained During the Quarter Ended March 31, 2023
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA
$
-
$
1,067
$
-
$
1,067
Mortgage-backed securities - FNMA
-
9,899
-
9,899
Total trading account debt securities
$
-
$
10,966
$
-
$
10,966
Mortgage servicing rights
$
-
$
-
$
278
$
278
Total
$
-
$
10,966
$
278
$
11,244
During the quarter ended March 31, 2024, the Corporation retained servicing rights on whole loan sales involving approximately $
11
million in principal balance outstanding (March 31, 2023 - $
10
0.2
31, 2023 - gains of $
0.2
recourse agreements.
The Corporation recognizes as assets the rights to service loans for others, whether these rights are purchased or result from asset
transfers such as sales and securitizations. These mortgage servicing rights (“MSRs”) are measured at fair value.
The Corporation uses a discounted cash flow model to estimate the fair value of MSRs. The discounted cash flow model
incorporates assumptions that market participants would use in estimating future net servicing income, including estimates of
prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, prepayment and late
fees, among other considerations. Prepayment speeds are adjusted for the loans’ characteristics and portfolio behavior.
The following table presents the changes in MSRs measured using the fair value method for the quarters ended March 31, 2024
and 2023.
68
Residential MSRs
(In thousands)
March 31, 2024
March 31, 2023
Fair value at beginning of period
$
118,109
$
128,350
Additions
294
501
Changes due to payments on loans
[1]
(2,100)
(2,422)
Reduction due to loan repurchases
(137)
(240)
Changes in fair value due to changes in valuation model inputs or assumptions
(1,202)
1,286
Fair value at end of period
[2]
$
114,964
$
127,475
[1] Represents changes due to collection / realization of expected cash flows over time.
[2] At March 31, 2024, PB had MSRs amounting to $
2
.0 million (March 31, 2023 - $
2.0
Residential mortgage loans serviced for others were $
9.7
9.9
Net mortgage servicing fees, a component of mortgage banking activities in the Consolidated Statements of Operations, include the
changes from period to period in the fair value of the MSRs, including changes due to collection / realization of expected cash flows.
The banking subsidiaries receive servicing fees based on a percentage of the outstanding loan balance. These servicing fees are
credited to income when they are collected. As of March 31, 2024, weighted average mortgage servicing fees were
0.32
% (March
31, 2023 -
0.31
%). Under these servicing agreements, the banking subsidiaries do not generally earn significant prepayment penalty
fees on the underlying loans serviced.
The section below includes information on assumptions used in the valuation model of the MSRs, originated and purchased. Key
economic assumptions used in measuring the servicing rights derived from loans securitized or sold by the Corporation during the
quarters ended March 31, 2024 and 2023 were as follows:
Quarters ended
March 31, 2024
March 31, 2023
BPPR
PB
BPPR
PB
Prepayment speed
6.1
%
6.0
%
6.7
%
7.3
%
Weighted average life (in years)
9.6
8.8
8.9
8.0
Discount rate (annual rate)
9.5
%
12.5
%
9.5
%
10.5
%
Key economic assumptions used to estimate the fair value of MSRs derived from sales and securitizations of mortgage loans
performed by the banking subsidiaries and servicing rights purchased from other financial institutions, and the sensitivity to
immediate changes in those assumptions, were as follows as of the end of the periods reported:
69
Originated MSRs
Purchased MSRs
March 31,
December 31,
March 31,
December 31,
(In thousands)
2024
2023
2024
2023
Fair value of servicing rights
$
38,660
$
39,757
$
76,304
$
78,352
Weighted average life (in years)
6.5
6.6
6.7
6.8
Weighted average prepayment speed (annual rate)
5.7
%
5.9
%
6.8
%
7.0
%
Impact on fair value of 10% adverse change
$
(721)
$
(696)
$
(1,410)
$
(1,440)
Impact on fair value of 20% adverse change
$
(1,416)
$
(1,365)
$
(2,767)
$
(2,827)
Weighted average discount rate (annual rate)
11.3
%
11.3
%
10.9
%
10.9
%
Impact on fair value of 10% adverse change
$
(1,438)
$
(1,387)
$
(2,783)
$
(2,871)
Impact on fair value of 20% adverse change
$
(2,782)
$
(2,686)
$
(5,391)
$
(5,562)
The sensitivity analyses presented in the table above for servicing rights are hypothetical and should be used with caution. As the
figures indicate, changes in fair value based on a 10 and 20 percent variation in assumptions generally cannot be extrapolated
because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the sensitivity tables
included herein, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without
changing any other assumption. In reality, changes in one factor may result in changes in another (for example, increases in market
interest rates may result in lower prepayments and increased credit losses), which might magnify or counteract the sensitivities.
At March 31, 2024, the Corporation serviced $
544
(December 31, 2023 - $
561
the Corporation’s liability of estimated losses related to loans serviced with credit recourse.
Under the GNMA securitizations, the Corporation, as servicer, has the right to repurchase (but not the obligation), at its option and
without GNMA’s prior authorization, any loan that is collateral for a GNMA guaranteed mortgage-backed security when certain
delinquency criteria are met. At the time that individual loans meet GNMA’s specified delinquency criteria and are eligible for
repurchase, the Corporation is deemed to have regained effective control over these loans if the Corporation was the pool issuer. At
March 31, 2024, the Corporation had recorded $
10
related to this buy-back option program (December 31, 2023 - $
11
payment forbearance programs but continue to reflect the contractual delinquency until the borrower repays deferred payments or
completes a payment deferral modification or other borrower assistance alternative. As long as the Corporation continues to service
the loans that continue to be collateral in a GNMA guaranteed mortgage-backed security, the MSR is recognized by the
Corporation.
During the quarter ended March 31, 2024, the Corporation repurchased approximately $
10
18
mortgage loans from its GNMA servicing portfolio. The determination to repurchase these loans was based on the economic
benefits of the transaction, which results in a reduction of the servicing costs for these severely delinquent loans, mainly related to
principal and interest advances. The risk associated with the loans is reduced due to their guaranteed nature. The Corporation may
place these loans under modification programs offered by FHA, VA or United States Department of Agriculture (USDA) or other loss
mitigation programs offered by the Corporation, and once brought back to current status, these may be either retained in portfolio or
re-sold in the secondary market.
70
Note 11 – Other real estate owned
The following tables present the activity related to Other Real Estate Owned (“OREO”), for the quarters ended March 31, 2024 and
2023.
For the quarter ended March 31, 2024
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
11,189
$
69,227
$
80,416
Write-downs in value
(25)
(284)
(309)
Additions
5,344
12,636
17,980
Sales
(546)
(16,934)
(17,480)
Other adjustments
-
(65)
(65)
Ending balance
$
15,962
$
64,580
$
80,542
For the quarter ended March 31, 2023
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
12,500
$
76,626
$
89,126
Write-downs in value
(194)
(751)
(945)
Additions
1,023
18,675
19,698
Sales
(941)
(15,099)
(16,040)
Other adjustments
-
(118)
(118)
Ending balance
$
12,388
$
79,333
$
91,721
71
Note 12 − Other assets
The caption of other assets in the consolidated statements of financial condition consists of the following major categories:
(In thousands)
March 31, 2024
December 31, 2023
Net deferred tax assets (net of valuation allowance)
$
1,001,093
$
1,009,068
Investments under the equity method
244,165
236,485
Prepaid taxes
32,146
39,052
Other prepaid expenses
26,332
29,338
Capitalized software costs
102,716
93,404
Derivative assets
24,040
24,419
Trades receivable from brokers and counterparties
23,477
23,102
Receivables from investments maturities
301,000
176,000
Principal, interest and escrow servicing advances
47,594
48,557
Guaranteed mortgage loan claims receivable
27,722
29,648
Operating ROU assets (Note 27)
110,712
116,106
Finance ROU assets (Note 27)
20,344
21,093
Assets for pension benefit
24,406
23,404
Others
135,155
144,888
Total other assets
$
2,120,902
$
2,014,564
The Corporation regularly incurs in capitalizable costs associated with software development or licensing which are recorded within
the Other Assets line item in the accompanying Consolidated Statements of Financial Condition. In addition, the Corporation incurs
costs associated with hosting arrangements that are service contracts that are also recorded within Other Assets. The hosting
arrangements can include capitalizable implementation costs that are amortized during the term of the hosting arrangement.
The
following table summarizes the composition of acquired or developed software costs as well as costs related to hosting
arrangements:
Gross Carrying
Accumulated
Net
Carrying
(In thousands)
Amount
Amortization
Value
March 31, 2024
Software development costs
$
75,489
$
23,983
$
51,506
Software license costs
47,950
23,658
24,292
Cloud computing arrangements
37,240
10,322
26,918
Total Capitalized software costs [1] [2]
$
160,679
$
57,963
$
102,716
December 31, 2023
Software development costs
$
76,497
$
22,086
$
54,411
Software license costs
42,868
18,048
24,820
Cloud computing arrangements
23,623
9,450
14,173
Total Capitalized software costs [1] [2]
$
142,988
$
49,584
$
93,404
[1]
Software intangible assets are presented as part of Other Assets in the Consolidated Statements of Financial Condition.
[2]
The tables above excludes assets that have been fully amortized.
Total amortization expense for all capitalized software and hosting arrangement cost, reflected as part of technology and software
expenses in the consolidated statement of operations, is as follows:
Quarters ended March 31,
(In thousands)
2024
2023
Software development and license costs
$
17,701
$
14,991
Cloud computing arrangements
872
984
Total amortization expense
$
18,573
$
15,975
72
Note 13 – Goodwill and other intangible assets
Goodwill
There were
no
The following tables present the gross amount of goodwill and accumulated impairment losses by reportable segments:
March 31, 2024
Balance at
Balance at
March 31,
Accumulated
March 31,
2024
impairment
2024
(In thousands)
losses
Banco Popular de Puerto Rico
$
440,184
$
3,801
$
436,383
Popular U.S.
564,456
196,411
368,045
Total Popular, Inc.
$
1,004,640
$
200,212
$
804,428
December 31, 2023
December 31,
Accumulated
December 31,
2023
impairment
2023
(In thousands)
losses
Banco Popular de Puerto Rico
$
440,184
$
3,801
$
436,383
Popular U.S.
564,456
196,411
368,045
Total Popular, Inc.
$
1,004,640
$
200,212
$
804,428
Other Intangible Assets
The following table reflects the components of other intangible assets subject to amortization:
Gross Carrying
Accumulated
Net
Carrying
(In thousands)
Amount
Amortization
Value
March 31, 2024
Core deposits
$
12,810
$
11,636
$
1,174
Other customer relationships
14,286
7,251
7,035
Total other intangible assets
$
27,096
$
18,887
$
8,209
December 31, 2023
Core deposits
$
12,810
$
11,315
$
1,495
Other customer relationships
14,286
6,777
7,509
Total other intangible assets
$
27,096
$
18,092
$
9,004
73
During the quarter ended March 31, 2024, the Corporation recognized $
0.8
assets with definite useful lives (March 31, 2023 - $
0.8
The following table presents the estimated amortization of the intangible assets with definite useful lives for each of the following
periods:
(In thousands)
Remaining 2024
$
2,143
Year 2025
1,750
Year 2026
1,440
Year 2027
959
Year 2028
959
Later years
958
74
Note 14 – Deposits
Total deposits as of the end of the periods presented consisted of:
(In thousands)
March 31, 2024
December 31, 2023
Savings accounts
$
14,797,976
$
14,602,411
NOW, money market and other interest bearing demand deposits
24,763,686
25,094,316
Total savings, NOW, money market and other interest bearing demand deposits
39,561,662
39,696,727
Certificates of deposit:
Under $250,000
5,420,905
5,443,062
$250,000 and over
3,334,167
3,058,830
8,755,072
8,501,892
Total interest bearing deposits
$
48,316,734
$
48,198,619
Non- interest bearing deposits
$
15,492,050
$
15,419,624
Total deposits
$
63,808,784
$
63,618,243
A summary of certificates of deposits by maturity at March 31, 2024 follows:
(In thousands)
2024
$
4,649,279
2025
1,915,324
2026
838,041
2027
470,438
2028
625,629
2029 and thereafter
256,361
Total certificates of deposit
$
8,755,072
At March 31, 2024, the Corporation had brokered deposits amounting to $
1.6
1.7
The aggregate amount of overdrafts in demand deposit accounts that were reclassified to loans was $
12.2
(December 31, 2023 - $
9.1
At March 31, 2024, Puerto Rico public sector deposits amounted to $
18.0
bearing accounts. These public sector deposits are indexed to short-term market rates and fluctuate in cost with changes in those
rates, in accordance with contractual terms. Public deposit balances are difficult to predict. For example, the receipt by the Puerto
Rico Government of hurricane recovery related Federal assistance and seasonal tax collections could increase public deposit
balances at BPPR. On the other hand, the amount and timing of reductions in balances are likely to be impacted by, for example,
the speed at which federal assistance is distributed, the financial condition, liquidity and cash management practices of the Puerto
Rico Government and its instrumentalities and the implementation of fiscal and debt adjustment plans approved pursuant to
PROMESA or other actions mandated by the Fiscal Oversight and Management Board for Puerto Rico (the “Oversight Board”).
Generally, these deposits require that the bank pledge high credit quality securities as collateral, therefore, liquidity risk arising from
public sector deposit outflows are lower.
75
Note 15 – Borrowings
Assets sold under agreements to repurchase
Assets sold under agreements to repurchase amounted to $
66
91
The Corporation’s repurchase transactions are overcollateralized with the securities detailed in the table below. The Corporation’s
repurchase agreements have a right of set-off with the respective counterparty under the supplemental terms of the master
repurchase agreements. In an event of default, each party has a right of set-off against the other party for amounts owed in the
related agreement and any other amount or obligation owed in respect of any other agreement or transaction between them.
Pursuant to the Corporation’s accounting policy, the repurchase agreements are not offset with other repurchase agreements held
with the same counterparty.
The following table presents information related to the Corporation’s repurchase transactions accounted for as secured borrowings
that are collateralized with debt securities available-for-sale, debt securities held-to-maturity, other assets held-for-trading purposes
or which have been obtained under agreements to resell. It is the Corporation’s policy to maintain effective control over assets sold
under agreements to repurchase; accordingly, such securities continue to be carried on the Consolidated Statements of Financial
Condition.
Repurchase agreements accounted for as secured borrowings
March 31, 2024
December 31, 2023
Repurchase
Repurchase
(In thousands)
U.S. Treasury securities
Within 30 days
$
30,581
$
16,931
After 30 to 90 days
18,504
18,369
After 90 days
-
8,292
Total U.S. Treasury securities
49,085
43,592
Mortgage-backed securities
11,550
27,171
5,228
20,394
Total mortgage-backed securities
16,778
47,565
Collateralized mortgage obligations
227
227
Total collateralized mortgage obligations
227
227
Total
$
66,090
$
91,384
Repurchase agreements in this portfolio are generally short-term, often overnight. As such our risk is very limited. We manage the
liquidity risks arising from secured funding by sourcing funding globally from a diverse group of counterparties, providing a range of
securities collateral and pursuing longer durations, when appropriate.
Other short-term borrowings
There were
no
76
Notes Payable
The following table presents the composition of notes payable at March 31, 2024 and December 31, 2023.
(In thousands)
March 31, 2024
December 31, 2023
Advances with the FHLB with maturities ranging from
2024
2029
monthly
fixed rates ranging from
0.44
% to
5.26
%
$
373,665
$
394,665
Unsecured senior debt securities maturing on
2028
semiannually
7.25
%, net of debt issuance costs of $
5,715
[1]
394,285
393,937
Junior subordinated deferrable interest debentures (related to trust preferred securities) maturing on
2034
6.125
% to
6.564
%, net of debt issuance costs of $
281
198,353
198,346
Total notes payable
$
966,303
$
986,948
Note: Refer to the 2023 Form 10-K for rates information at December 31, 2023.
[1] On March 13, 2023, the Corporation issued $
400
7.25
% Senior Notes due
2028
underwritten public offering. The Corporation used a portion of the net proceeds of the 2028 Notes offering to redeem, on August 14, 2023, the
outstanding $
300
6.125
% Senior Notes which were due on September
. The redemption price was
equal to
100
% of the principal amount plus accrued and unpaid interest through the redemption date.
A breakdown of borrowings by contractual maturities at March 31, 2024 is included in the table below.
Assets sold under
(In thousands)
agreements to
repurchase
Notes payable
Total
2024
$
66,090
$
70,943
$
137,033
2025
-
144,214
144,214
2026
-
74,500
74,500
2028
-
438,636
438,636
Later years
-
238,010
238,010
Total borrowings
$
66,090
$
966,303
$
1,032,393
At March 31, 2024 and December 31, 2023, the Corporation had FHLB borrowing facilities whereby the Corporation could borrow
up to $
4.4
4.2
0.4
31, 2023, the Corporation had placed $
0.3
secure deposits. The FHLB borrowing facilities are collateralized with securities and loans held-in-portfolio, and do not have
restrictive covenants or callable features.
Also, at March 31, 2024, the Corporation had borrowing facilities at the discount window of the Federal Reserve Bank of New York
amounting to $
4.6
4.4
The facilities are a collateralized source of credit that is highly reliable even under difficult market conditions.
77
Note 16 − Other liabilities
The caption of other liabilities in the consolidated statements of financial condition consists of the following major categories:
(In thousands)
March 31, 2024
December 31, 2023
Accrued expenses
$
361,839
$
337,695
Accrued interest payable
48,302
59,102
Accounts payable
92,715
89,339
Dividends payable
44,869
44,741
Trades payable
45
31
Liability for GNMA loans sold with an option to repurchase
9,538
10,960
Reserves for loan indemnifications
4,542
4,408
Reserve for operational losses
25,209
27,994
Operating lease liabilities (Note 27)
121,333
126,946
Finance lease liabilities (Note 27)
24,897
25,778
Pension benefit obligation
6,696
6,772
Postretirement benefit obligation
115,421
117,045
Others
63,042
63,816
Total other liabilities
$
918,448
$
914,627
78
Note 17 – Stockholders’ equity
As of March 31, 2024, stockholders’ equity totaled $
5.2
cash dividends of $
0.62
0.55
) per common share amounting to $
44.8
39.6
declared to stockholders of record as of the close of business on
March 14, 2024
April 1, 2024
. On May 9, 2024, the
Corporation’s Board of Directors approved a quarterly cash dividend of $
0.62
on
July 1, 2024
May 30, 2024
.
79
Note 18 – Other comprehensive income (loss)
The following table presents changes in accumulated other comprehensive income (loss) by component for the quarters ended
March 31, 2024 and, 2023.
Changes in Accumulated Other Comprehensive Income (Loss) by Component [1]
Quarters ended March 31,
(In thousands)
2024
2023
Foreign currency translation
Beginning Balance
$
(64,528)
$
(56,735)
Other comprehensive loss
(4,020)
(5,245)
Net change
(4,020)
(5,245)
Ending balance
$
(68,548)
$
(61,980)
Adjustment of pension and
postretirement benefit plans
Beginning Balance
$
(117,894)
$
(144,335)
Other comprehensive loss before reclassifications
-
-
Amounts reclassified from accumulated other comprehensive loss for
amortization of net losses
2,262
3,008
Net change
2,262
3,008
Ending balance
$
(115,632)
$
(141,327)
Unrealized net holding losses on
debt securities
Beginning Balance
$
(1,713,109)
$
(2,323,903)
Other comprehensive income (loss) before reclassifications
(71,104)
191,752
Amounts reclassified from accumulated other comprehensive loss for
amortization of net unrealized losses of debt securities transferred from
available-for-sale to held-to-maturity
35,207
33,633
Net change
(35,897)
225,385
Ending balance
$
(1,749,006)
$
(2,098,518)
Unrealized net gains on cash
flow hedges
Beginning Balance
$
-
$
45
Other comprehensive (loss) income before reclassifications
-
(19)
Amounts reclassified from accumulated other comprehensive gains
-
(26)
Net change
-
(45)
Ending balance
$
-
$
-
Total
$
(1,933,186)
$
(2,301,825)
[1] All amounts presented are net of tax.
80
The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss during the
quarters ended March 31, 2024 and 2023.
Reclassifications Out of Accumulated Other Comprehensive Loss
Affected Line Item in the
Quarters ended March 31,
(In thousands)
Consolidated Statements of Operations
2024
2023
Adjustment of pension and postretirement benefit plans
Amortization of net losses
Other operating expenses
$
(3,618)
$
(4,813)
Total before tax
(3,618)
(4,813)
Income tax benefit
1,356
1,805
Total net of tax
$
(2,262)
$
(3,008)
Unrealized holding losses on debts securities
Amortization of unrealized net losses of debt
securities transferred to held-to-maturity
Investment securities
$
(44,009)
$
(42,040)
Total before tax
(44,009)
(42,040)
Income tax benefit
8,802
8,407
Total net of tax
$
(35,207)
$
(33,633)
Unrealized net gains on cash flow hedges
Forward contracts
Mortgage banking activities
$
-
$
41
Total before tax
-
41
Income tax expense
-
(15)
Total net of tax
$
-
$
26
Total reclassification adjustments, net of tax
$
(37,469)
$
(36,615)
81
Note 19 – Guarantees
At March 31, 2024, the Corporation had a liability of $
1
1
balance of the obligations undertaken in issuing the guarantees under the standby letters of credit. Management does not anticipate
any material losses related to these instruments.
From time to time, the Corporation securitized mortgage loans into guaranteed mortgage-backed securities subject to limited, and in
certain instances, lifetime credit recourse on the loans that serve as collateral for the mortgage-backed securities. The Corporation
has not sold any mortgage loans subject to credit recourse since 2009. At March 31, 2024, the Corporation serviced $
544
(December 31, 2023 - $
561
with FNMA and FHLMC residential mortgage loan securitization programs. In the event of any customer default, pursuant to the
credit recourse provided, the Corporation is required to repurchase the loan or reimburse the third party investor for the incurred
loss. The maximum potential amount of future payments that the Corporation would be required to make under the recourse
arrangements in the event of nonperformance by the borrowers is equivalent to the total outstanding balance of the residential
mortgage loans serviced with recourse and interest, if applicable. During the quarter ended March 31, 2024, the Corporation
repurchased approximately $
0.6
(March 31, 2023
-
$
1
securing the mortgage loan. The Corporation suffers ultimate losses on these loans when the proceeds from a foreclosure sale of
the property underlying a defaulted mortgage loan are less than the outstanding principal balance of the loan plus any uncollected
interest advanced and the costs of holding and disposing the related property. At March 31, 2024, the Corporation’s liability
established to cover the estimated credit loss exposure related to loans sold or serviced with credit recourse amounted to $
4
(December 31, 2023 - $
4
The following table shows the changes in the Corporation’s liability of estimated losses related to loans serviced with credit recourse
provisions during the quarters ended March 31, 2024 and 2023.
Quarters ended
March 31,
(In thousands)
2024
2023
Balance as of beginning of period
$
4,211
$
6,897
Provision (benefit) for recourse liability
244
(654)
Net charge-offs
(102)
(379)
Balance as of end of period
$
4,353
$
5,864
From time to time, the Corporation sells loans and agrees to indemnify the purchaser for credit losses or any breach of certain
representations and warranties made in connection with the sale.
Servicing agreements relating to the mortgage-backed securities programs of FNMA, FHLMC and GNMA, and to mortgage loans
sold or serviced to certain other investors, including FHLMC, require the Corporation to advance funds to make scheduled payments
of principal, interest, taxes and insurance, if such payments have not been received from the borrowers. At March 31, 2024, the
Corporation serviced $
9.7
2023 - $
9.9
from liquidation proceeds when the mortgage loan is foreclosed or, in the case of FHA/VA loans, under the applicable FHA and
VA
insurance and guarantees programs. However, in the meantime, the Corporation must absorb the cost of the funds it advances
during the time the advance is outstanding. The Corporation must also bear the costs of attempting to collect on delinquent and
defaulted mortgage loans. In addition, if a defaulted loan is not cured, the mortgage loan would be canceled as part of the
foreclosure proceedings and the Corporation would not receive any future servicing income with respect to that loan. At March 31,
2024, the outstanding balance of funds advanced by the Corporation under such mortgage loan servicing agreements was
approximately $
48
49
servicing portfolio experience increased delinquencies, the Corporation would be required to dedicate additional cash resources to
comply with its obligation to advance funds as well as incur additional administrative costs related to increases in collection efforts.
Popular, Inc. Holding Company (“PIHC”) fully and unconditionally guarantees certain borrowing obligations issued by certain of its
100
% owned consolidated subsidiaries amounting to $
94
addition, at both March 31, 2024 and December 31, 2023, PIHC fully and unconditionally guaranteed on a subordinated basis $
193
82
million of capital securities (trust preferred securities) issued by wholly-owned issuing trust entities to the extent set forth in the
applicable guarantee agreement. Refer to Note 18 to the Consolidated Financial Statements in the 2023 Form 10-K for further
information on the trust preferred securities.
83
Note 20 – Commitments and contingencies
Off-balance sheet risk
The Corporation is a party to financial instruments with off-balance sheet credit risk in the normal course of business to meet the
financial needs of its customers. These financial instruments include loan commitments, letters of credit and standby letters of credit.
These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the
consolidated statements of financial condition.
The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for
commitments to extend credit, standby letters of credit and financial guarantees is represented by the contractual notional amounts
of those instruments. The Corporation uses the same credit policies in making these commitments and conditional obligations as it
does for those reflected on the consolidated statements of financial condition.
Financial instruments with off-balance sheet credit risk, whose contract amounts represent potential credit risk as of the end of the
periods presented were as follows:
(In thousands)
March 31, 2024
December 31, 2023
Commitments to extend credit:
Credit card lines
$
6,130,148
$
6,108,939
Commercial lines of credit
3,661,556
3,626,269
Construction lines of credit
1,212,596
1,287,679
Other consumer unused credit commitments
257,059
256,610
Commercial letters of credit
1,234
1,404
Standby letters of credit
115,808
80,889
Commitments to originate or fund mortgage loans
29,524
32,968
At March 31, 2024 and December 31, 2023, the Corporation maintained a reserve of approximately $
16.8
17
respectively, for potential losses associated with unfunded loan commitments related to commercial and construction lines of credit.
Other commitments
At March 31, 2024 and December 31, 2023, the Corporation also maintained other non-credit commitments for approximately $
3.3
million, primarily for the acquisition of other investments.
Business concentration
Since the Corporation’s business activities are concentrated primarily in Puerto Rico, its results of operations and financial condition
are dependent upon the general trends of the Puerto Rico economy and, in particular, the residential and commercial real estate
markets. The concentration of the Corporation’s operations in Puerto Rico exposes it to greater risk than other banking companies
with a wider geographic base. Its asset and revenue composition by geographical area is presented in Note 32 to the Consolidated
Financial Statements.
Puerto Rico has faced significant fiscal and economic challenges for over a decade. In response to such challenges, the U.S.
Congress enacted the Puerto Rico Oversight Management and Economic Stability Act (“PROMESA”) in 2016, which, among other
things, established the Oversight Board and a framework for the restructuring of the debts of the Commonwealth, its
instrumentalities and municipalities. The Commonwealth and several of its instrumentalities have commenced debt restructuring
proceedings under PROMESA. As of the date of this report, while municipalities have been designated as covered entities under
PROMESA, no municipality has commenced, or has been authorized by the Oversight Board to commence, any such debt
restructuring proceeding under PROMESA.
At March 31, 2024, the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and municipalities
totaled $
388
363
362
333
outstanding, $
348
16
314
19
Substantially all of the amount outstanding at March 31, 2024 and December 31, 2023 were obligations from various Puerto Rico
municipalities. In most cases, these were “general obligations” of a municipality, to which the applicable municipality has pledged its
good faith, credit and unlimited taxing power, or “special obligations” of a municipality, to which the applicable municipality has
pledged other revenues. At March 31, 2024,
78
% of the Corporation’s exposure to municipal loans and securities was concentrated
in the municipalities of San Juan, Guaynabo, Carolina and Caguas.
84
The following table details the loans and investments representing the Corporation’s direct exposure to the Puerto Rico government
according to their maturities as of March 31, 2024:
(In thousands)
Investment
Portfolio
Loans
Total Outstanding
Total Exposure
Central Government
After 1 to 5 years
$
3
$
-
$
3
$
3
After 5 to 10 years
1
-
1
1
After 10 years
42
-
42
42
Total Central Government
46
-
46
46
Municipalities
Within 1 year
3,055
13,218
16,273
41,273
After 1 to 5 years
11,620
141,519
153,139
153,139
After 5 to 10 years
845
145,965
146,810
146,810
After 10 years
-
46,823
46,823
46,823
Total Municipalities
15,520
347,525
363,045
388,045
Total Direct Government Exposure
$
15,566
$
347,525
$
363,091
$
388,091
In addition, at March 31, 2024, the Corporation had $
233
entities but for which the principal source of repayment is non-governmental ($
238
$
187
instrumentality that has been designated as a covered entity under PROMESA (December 31, 2023 - $
191
mortgage loans are secured by first mortgages on Puerto Rico residential properties and the HFA insurance covers losses in the
event of a borrower default and upon the satisfaction of certain other conditions. The Corporation also had at March 31, 2024, $
39
million in bonds issued by HFA which are secured by second mortgage loans on Puerto Rico residential properties, and for which
HFA also provides insurance to cover losses in the event of a borrower default and upon the satisfaction of certain other conditions
(December 31, 2023 - $
40
those serving as collateral for the HFA bonds default and the collateral is insufficient to satisfy the outstanding balance of these
loans, HFA’s ability to honor its insurance will depend, among other factors, on the financial condition of HFA at the time such
obligations become due and payable. The Corporation does not consider the government guarantee when estimating the credit
losses associated with this portfolio. Although the Governor is currently authorized by local legislation to impose a temporary
moratorium on the financial obligations of the HFA, a moratorium on such obligations has not been imposed as of the date hereof.
BPPR’s commercial loan portfolio also includes loans to private borrowers who are service providers, lessors, suppliers or have
other relationships with the government. These borrowers could be negatively affected by the Commonwealth’s fiscal crisis and the
ongoing Title III proceedings under PROMESA. Similarly, BPPR’s mortgage and consumer loan portfolios include loans to
government employees and retirees, which could also be negatively affected by fiscal measures such as employee layoffs or
furloughs or reductions in pension benefits.
In addition, $
1.9
92.4
Government or its agencies at March 31, 2024 (compared to $
1.9
89.2
The Corporation also had U.S. Treasury and obligations from the U.S. Government, its agencies or government sponsored entities
within the portfolio of available-for-sale and held-to-maturity securities as described in Note 5 and 6 to the Consolidated Financial
Statements.
At March 31, 2024, the Corporation had operations in the United States Virgin Islands (the “USVI”) and has approximately $
28
million in direct exposure to USVI government entities (December 31, 2023 - $
28
number of fiscal and economic challenges that could adversely affect the ability of its public corporations and instrumentalities to
service their outstanding debt obligations.
At March 31, 2024, the Corporation had operations in the British Virgin Islands (“BVI”), which islands were negatively affected by the
COVID-19 pandemic, particularly due to a reduction in the tourism activity which accounts for a significant portion of their economy.
Although the Corporation has no significant exposure to a single borrower in the BVI, at March 31, 2024, it had a loan portfolio
85
amounting to approximately $
208
205
million at December 31, 2023.
FDIC Special Assessment
On November 16, 2023, the Federal Deposit Insurance Corporation (“FDIC”) approved a final rule that imposes a special
assessment (the “FDIC Special Assessment”) to recover the losses to the deposit insurance fund resulting from the FDIC’s use, in
March 2023, of the systemic risk exception to the least-cost resolution test under the Federal Deposit Insurance Act in connection
with the receiverships of several failed banks. In connection with this assessment, the Corporation recorded an expense of $
71.4
million, $
45.3
During the quarter ended March 31, 2024, the Corporation recorded an additional expense of $
14.3
9.1
reflect the FDIC's higher loss estimate which increased from $
16.3
20.4
special assessment amount and collection period may change as the estimated loss is periodically adjusted or if the total amount
collected varies.
Legal Proceedings
The nature of Popular’s business ordinarily generates claims, litigation, investigations, and legal and administrative cases and
proceedings (collectively, “Legal Proceedings”). When the Corporation determines that it has meritorious defenses to the claims
asserted, it vigorously defends itself. The Corporation will consider the settlement of cases (including cases where it has meritorious
defenses) when, in management’s judgment, it is in the best interest of the Corporation and its stockholders to do so. On at least a
quarterly basis, Popular assesses its liabilities and contingencies relating to outstanding Legal Proceedings utilizing the most current
information available. For matters where it is probable that the Corporation will incur a material loss and the amount can be
reasonably estimated, the Corporation establishes an accrual for the loss. Once established, the accrual is adjusted on at least a
quarterly basis to reflect any relevant developments, as appropriate. For matters where a material loss is not probable, or the
amount of the loss cannot be reasonably estimated, no accrual is established.
In certain cases, exposure to loss exists in excess of any accrual to the extent such loss is reasonably possible, but not probable.
Management believes and estimates that the range of reasonably possible losses (with respect to those matters where such limits
may be determined, in excess of amounts accrued) for current Legal Proceedings ranged from $
0
15.8
of March 31, 2024. In certain cases, management cannot reasonably estimate the possible loss at this time. Any estimate involves
significant judgment, given the varying stages of the Legal Proceedings (including the fact that many of them are currently in
preliminary stages), the existence of multiple defendants in several of the current Legal Proceedings whose share of liability has yet
to be determined, the numerous unresolved issues in many of the Legal Proceedings, and the inherent uncertainty of the various
potential outcomes of such Legal Proceedings. Accordingly, management’s estimate will change from time-to-time, and actual
losses may be more or less than the current estimate.
While the outcome of Legal Proceedings is inherently uncertain, based on information currently available, advice of counsel, and
available insurance coverage, management believes that the amount it has already accrued is adequate and any incremental
liability arising from the Legal Proceedings in matters in which a loss amount can be reasonably estimated will not have a material
adverse effect on the Corporation’s consolidated financial position. However, in the event of unexpected future developments, it is
possible that the ultimate resolution of these matters in a reporting period, if unfavorable, could have a material adverse effect on
the Corporation’s consolidated financial position for that period.
Set forth below is a description of the Corporation’s significant Legal Proceedings.
Insufficient Funds and Overdraft Fees Class Actions
Popular, Inc. was named as a defendant on a putative class action complaint captioned Golden v. Popular, Inc. filed in March 2020
before the U.S. District Court for the Southern District of New York, seeking damages, restitution and injunctive relief. Plaintiff
alleged breach of contract, violation of the covenant of good faith and fair dealing, unjust enrichment and violation of New York
consumer protection law due to Popular’s purported practice of charging overdraft fees (“OD Fees”) on transactions that, under
86
plaintiffs’ theory, do not overdraw the account. Plaintiff described Popular’s purported practice of charging OD Fees as “Authorize
Positive, Purportedly Settle Negative” (“APPSN”) transactions and alleged that Popular assesses OD Fees over authorized
transactions for which sufficient funds are held for settlement. In August 2020, Popular filed a Motion to Dismiss on several
grounds, including failure to state a claim against Popular, Inc. and improper venue. In October 2020, Plaintiff filed a Notice of
Voluntary Dismissal before the U.S. District Court for the Southern District of New York and, simultaneously, filed an identical
complaint in the U.S. District Court for the District of the Virgin Islands against Popular, Inc., Popular Bank and Banco Popular de
Puerto Rico (“BPPR”). In November 2020, Plaintiff filed a Notice of Voluntary Dismissal against Popular, Inc. and Popular Bank
following a Motion to Dismiss filed on behalf of such entities, which argued failure to state a claim and lack of minimum contacts of
such parties with the U.S.V.I. district court jurisdiction. BPPR, the only defendant remaining in the case, was served with process in
November 2020 and filed a Motion to Dismiss in January 2021.
In October 2022, the parties reached a settlement in principle on a class-wide basis subject to final court approval. In January 2023,
the parties filed before the Court a motion for preliminary approval of the settlement agreement and, on March 31, 2023, the Court
issued an order granting preliminary approval of the settlement agreement. The Court scheduled the final approval hearing for
September 8, 2023.
On September 8, 2023, the Court held a hearing to consider the final approval of the class settlement agreement, and, on
September 29, 2023, the Court issued an Opinion and Order granting final approval to the settlement agreement. On December 19,
2023, the Court issued an Order staying all deadlines in the settlement agreement regarding payment of benefit until further notice
after the parties informed the Court that the settlement administrator had mistakenly failed to send the settlement notice to
approximately 3,000 class members. On February 20, 2024, the parties filed a Joint Motion for Supplemental Notice that was
approved by the Court on February 20, 2024. The Court scheduled a supplemental fairness hearing for July 8, 2024.
On January 31, 2022, Popular was also named as a defendant on a putative class action complaint captioned Lipsett v. Popular,
Inc. d/b/a Banco Popular, filed before the U.S. District Court for the Southern District of New York, seeking damages, restitution and
injunctive relief. Similar to the claims set forth in the aforementioned Golden complaint, Plaintiff alleges breach of contract, including
violations of the covenant of good faith and fair dealing, as a result of Popular’s purported practice of charging OD Fees for APPSN
transactions. The complaint further alleged that Popular assesses OD Fees over authorized transactions for which sufficient funds
are held for settlement. Popular waived service of process and filed a Motion to Compel Arbitration. In response to Popular’s motion,
Plaintiff filed a Notice of Voluntary Dismissal in April 2022.
On May 13, 2022, Plaintiff in the Lipsett complaint filed a new complaint captioned Lipsett v. Banco Popular North America d/b/a
Popular Community Bank with the same allegations of his previous complaint against Popular. In September 2022, after serving
Plaintiff with a written notice of election to arbitrate the claims asserted in the complaint which went unanswered, Popular Bank
(“PB”) filed a new Motion to Compel Arbitration.
On December 9, 2022, the Court issued a Decision and Order denying PB’s Motion to Compel Arbitration. On December 20, 2022,
PB filed a Notice of Appeal with the United States Court of Appeals for the Second Circuit.
On January 10, 2024, the Court of Appeals entered judgment affirming the trial court’s decision denying PB’s Motion to Compel
Arbitration. After remand to the U.S. District Court, on March 19, 2024, the court issued an Order adjourning all dates and deadlines
including the initial pretrial conference after the parties informed that they have agreed to mediate the matter. During a mediation
hearing held on May 2, 2024, the parties reached a settlement in principle on a class-wide basis subject to final court approval.
87
Note 21 – Non-consolidated variable interest entities
The Corporation is involved with
three
are deemed to be variable interest entities (“VIEs”) since the equity investors at risk have no substantial decision-making rights. The
Corporation does not hold any variable interest in the trusts, and therefore, cannot be the trusts’ primary beneficiary. Furthermore,
the Corporation concluded that it did not hold a controlling financial interest in these trusts since the decisions of the trusts are
predetermined through the trust documents and the guarantee of the trust preferred securities is irrelevant since in substance the
sponsor is guaranteeing its own debt.
Also, the Corporation is involved with various special purpose entities mainly in guaranteed mortgage securitization transactions,
including GNMA and FNMA.
The Corporation has also engaged in securitization transactions with FHLMC, but considers its
exposure in the form of servicing fees and servicing advances not to be significant
at March 31, 2024
.
These special purpose
entities are deemed to be VIEs since they lack equity investments at risk. The Corporation’s continuing involvement in these
guaranteed loan securitizations includes owning certain beneficial interests in the form of securities as well as the servicing rights
retained. The Corporation is not required to provide additional financial support to any of the variable interest entities to which it has
transferred the financial assets. The mortgage-backed securities, to the extent retained, are classified in the Corporation’s
Consolidated Statements of Financial Condition as available-for-sale or trading securities. The Corporation concluded that,
essentially, these entities (FNMA and GNMA) control the design of their respective VIEs, dictate the quality and nature of the
collateral, require the underlying insurance, set the servicing standards via the servicing guides and can change them at will, and
can remove a primary servicer with cause, and without cause in the case of FNMA. Moreover, through their guarantee obligations,
agencies (FNMA and GNMA) have the obligation to absorb losses that could be potentially significant to the VIE.
The Corporation holds variable interests in these VIEs in the form of agency mortgage-backed securities and collateralized
mortgage obligations, including those securities originated by the Corporation and those acquired from third parties. Additionally, the
Corporation holds agency mortgage-backed securities and agency collateralized mortgage obligations issued by third party VIEs in
which it has no other form of continuing involvement. Refer to Note 23 to the Consolidated Financial Statements for additional
information on the debt securities outstanding at March 31, 2024 and December 31, 2023, which are classified as available-for-sale
and trading securities in the Corporation’s Consolidated Statements of Financial Condition. In addition, the Corporation holds
variable interests in the form of servicing fees, since it retains the right to service the transferred loans in those government-
sponsored special purpose entities (“SPEs”) and may also purchase the right to service loans in other government-sponsored SPEs
that were transferred to those SPEs by a third-party.
The following table presents the carrying amount and classification of the assets related to the Corporation’s variable interests in
non-consolidated VIEs and the maximum exposure to loss as a result of the Corporation’s involvement as servicer of GNMA and
FNMA loans at March 31, 2024 and December 31, 2023.
88
(In thousands)
March 31,2024
December 31, 2023
Assets
Servicing assets:
Mortgage servicing rights
$
90,254
$
92,999
Total servicing assets
$
90,254
$
92,999
Other assets:
Servicing advances
$
6,993
$
6,291
Total other assets
$
6,993
$
6,291
Total assets
$
97,247
$
99,290
Maximum exposure to loss
$
97,247
$
99,290
The size of the non-consolidated VIEs, in which the Corporation has a variable interest in the form of servicing fees, measured as
the total unpaid principal balance of the loans, amounted to $
7.0
7.2
The Corporation determined that the maximum exposure to loss includes the fair value of the MSRs and the assumption that the
servicing advances at March 31, 2024 and December 31, 2023, will not be recovered. The agency debt securities are not included
as part of the maximum exposure to loss since they are guaranteed by the related agencies.
ASU 2009-17 requires that an ongoing primary beneficiary assessment should be made to determine whether the Corporation is the
primary beneficiary of any of the VIEs it is involved with. The conclusion on the assessment of these non-consolidated VIEs has not
changed since their initial evaluation. The Corporation concluded that it is still not the primary beneficiary of these VIEs, and
therefore, these VIEs are not required to be consolidated in the Corporation’s financial statements at March 31, 2024.
89
Note 22 – Related party transactions
Centro Financiero BHD, S.A.
At March 31, 2024, the Corporation had a
15.84
% equity interest in Centro Financiero BHD, S.A. (“BHD”), one of the largest banking
and financial services groups in the Dominican Republic. During the quarter ended March 31, 2024, the Corporation recorded $
7.3
million in equity pickup from its investment in BHD (March 31, 2023 - $
9.1
233.2
March 31, 2024 (December 31, 2023 - $
225.9
no
BHD León during the quarters ended March 31, 2024 and 2023.
Investment Companies
The Corporation, through its subsidiary Popular Asset Management LLC (“PAM”), provides advisory services to several investment
companies registered under the Investment Company Act of 1940 in exchange for a fee. The Corporation, through its subsidiary
BPPR, also provides transfer agency services to these investment companies. These fees are calculated at an annual rate of the
average net assets of the investment company, as defined in each agreement. Due to its advisory role, the Corporation considers
these investment companies as related parties.
For the quarter ended March 31, 2024, administrative fees charged to these investment companies amounted to $
0.6
31, 2023 -
0.6
0.2
0.2
0.4
31, 2023 - $
0.4
90
Note 23 – Fair value measurement
ASC Subtopic 820-10 “Fair Value Measurements and Disclosures” establishes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three levels in order to increase consistency and comparability in fair value
measurements and disclosures. The hierarchy is broken down into three levels based on the reliability of inputs as follows:
●
Level 1
- Unadjusted quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to
access at the measurement date. Valuation on these instruments does not necessitate a significant degree of judgment
since valuations are based on quoted prices that are readily available in an active market.
●
Level 2
- Quoted prices other than those included in Level 1 that are observable either directly or indirectly. Level 2 inputs
include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active, or other inputs that are observable or that can be corroborated by observable
market data for substantially the full term of the financial instrument.
●
Level 3
- Inputs are unobservable and significant to the fair value measurement. Unobservable inputs reflect the
Corporation’s own judgements about assumptions that market participants would use in pricing the asset or liability.
The Corporation maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the
observable inputs be used when available. Fair value is based upon quoted market prices when available. If listed prices or quotes
are not available, the Corporation employs internally-developed models that primarily use market-based inputs including yield
curves, interest rates, volatilities, and credit curves, among others. Valuation adjustments are limited to those necessary to ensure
that the financial instrument’s fair value is adequately representative of the price that would be received or paid in the marketplace.
These adjustments include amounts that reflect counterparty credit quality, the Corporation’s credit standing, constraints on liquidity
and unobservable parameters that are applied consistently. There have been no changes in the Corporation’s methodologies used
to estimate the fair value of assets and liabilities from those disclosed in the 2023 Form 10-K.
The estimated fair value may be subjective in nature and may involve uncertainties and matters of significant judgment for certain
financial instruments. Changes in the underlying assumptions used in calculating fair value could significantly affect the results.
Fair Value on a Recurring and Nonrecurring Basis
The following fair value hierarchy tables present information about the Corporation’s assets and liabilities measured at fair value on
a recurring basis at March 31, 2024 and December 31, 2023:
91
At March 31, 2024
(In thousands)
Level 1
Level 2
Level 3
Measured at NAV
Total
RECURRING FAIR VALUE MEASUREMENTS
Assets
Debt securities available-for-sale:
U.S. Treasury securities
$
6,262,480
$
6,026,731
$
-
$
-
$
12,289,211
Collateralized mortgage obligations - federal
agencies
-
127,608
-
-
127,608
Mortgage-backed securities
-
5,597,993
607
-
5,598,600
Other
-
5
2,000
-
2,005
Total debt securities available-for-sale
$
6,262,480
$
11,752,337
$
2,607
$
-
$
18,017,424
Trading account debt securities, excluding
derivatives:
U.S. Treasury securities
$
8,316
$
-
$
-
$
-
$
8,316
Obligations of Puerto Rico, States and political
subdivisions
-
60
-
-
60
Collateralized mortgage obligations
-
90
-
-
90
Mortgage-backed securities
-
18,587
84
-
18,671
Other
-
-
166
-
166
Total trading account debt securities, excluding
derivatives
$
8,316
$
18,737
$
250
$
-
$
27,303
Equity securities
$
-
$
40,933
$
-
$
336
$
41,269
Mortgage servicing rights
-
-
114,964
-
114,964
Loans held-for-sale
-
5,352
-
-
5,352
Derivatives
-
24,045
-
-
24,045
Total assets measured at fair value on a
recurring basis
$
6,270,796
$
11,841,404
$
117,821
$
336
$
18,230,357
Liabilities
Derivatives
$
-
$
(21,784)
$
-
$
-
$
(21,784)
Total liabilities measured at fair value on a
recurring basis
$
-
$
(21,784)
$
-
$
-
$
(21,784)
92
At December 31, 2023
(In thousands)
Level 1
Level 2
Level 3
Measured at NAV
Total
RECURRING FAIR VALUE MEASUREMENTS
Assets
Debt securities available-for-sale:
U.S. Treasury securities
$
3,936,036
$
6,811,025
$
-
$
-
$
10,747,061
Collateralized mortgage obligations - federal
agencies
-
134,686
-
-
134,686
Mortgage-backed securities
-
5,844,180
606
-
5,844,786
Other
-
11
2,500
-
2,511
Total debt securities available-for-sale
$
3,936,036
$
12,789,902
$
3,106
$
-
$
16,729,044
Trading account debt securities, excluding
derivatives:
U.S. Treasury securities
$
16,859
$
-
$
-
$
-
$
16,859
Obligations of Puerto Rico, States and political
subdivisions
-
71
-
-
71
Collateralized mortgage obligations
-
93
5
-
98
Mortgage-backed securities
-
14,261
112
-
14,373
Other
-
-
167
-
167
Total trading account debt securities, excluding
derivatives
$
16,859
$
14,425
$
284
$
-
$
31,568
Equity securities
$
-
$
37,965
$
-
$
310
$
38,275
Mortgage servicing rights
-
-
118,109
-
118,109
Loans held-for-sale
-
3,239
-
-
3,239
Derivatives
-
24,419
-
-
24,419
Total assets measured at fair value on a
recurring basis
$
3,952,895
$
12,869,950
$
121,499
$
310
$
16,944,654
Liabilities
Derivatives
$
-
$
(21,103)
$
-
$
-
$
(21,103)
Total liabilities measured at fair value on a
recurring basis
$
-
$
(21,103)
$
-
$
-
$
(21,103)
Beginning in the first quarter of 2023, the Corporation has elected the fair value option for newly originated mortgage loans held-for-
sale. This election better aligns with the management of the portfolio from a business perspective.
Loans held-for-sale measured at fair value
Loans held-for-sale measured at fair value were priced based on secondary market prices. These loans are classified as Level 2.
The following tables summarize the difference between the aggregate fair value and the aggregate unpaid principal balance for
mortgage loans originated as held-for-sale measured at fair value as of March 31, 2024 and December 31, 2023.
(In thousands)
March 31, 2024
Aggregate Unpaid
Fair Value
Principal Balance
Difference
Loans held for sale
$
5,352
$
5,285
$
67
(In thousands)
December 31, 2023
Aggregate Unpaid
Fair Value
Principal Balance
Difference
Loans held for sale
$
3,239
$
3,202
$
37
No
93
For the quarter ended March 31, 2024, changes in the fair value of mortgage loans held-for-sale for which the Corporation elected
the fair value option, were not considered material.
The fair value information included in the following tables is not as of period end, but as of the date that the fair value measurement
was recorded during the quarters ended March 31, 2024 and 2023 and excludes nonrecurring fair value measurements of assets no
longer outstanding as of the reporting date.
Quarter ended March 31, 2024
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets
Write-downs
Loans
[1]
$
-
$
-
$
110
$
110
$
(2,172)
Other real estate owned
[2]
-
-
1,416
1,416
(224)
Other foreclosed assets
[2]
-
-
105
105
(41)
Total assets measured at fair value on a nonrecurring basis
$
-
$
-
$
1,631
$
1,631
$
(2,437)
[1] Relates mainly to certain impaired collateral dependent loans. The impairment was measured based on the fair value of the collateral, which is
derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations. Costs to sell are
excluded from the reported fair value amount.
[2] Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are
excluded from the reported fair value amount.
Quarter ended March 31, 2023
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets
Write-downs
Loans
[1]
$
-
$
-
$
1,629
$
1,629
$
(3)
Other real estate owned
[2]
-
-
2,330
2,330
(628)
Other foreclosed assets
[2]
-
-
15
15
(4)
Total assets measured at fair value on a nonrecurring basis
$
-
$
-
$
3,974
$
3,974
$
(635)
[1] Relates mainly to certain impaired collateral dependent loans. The impairment was measured based on the fair value of the collateral, which is
derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations. Costs to sell are
excluded from the reported fair value amount.
[2] Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are
excluded from the reported fair value amount.
The following tables present the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarters
ended March 31, 2024 and 2023.
Quarter ended March 31, 2024
MBS
Other
CMOs
MBS
Other
classified
securities
classified
classified
securities
as debt
classified as
as trading
as trading
classified
securities
account
account
as trading
Mortgage
available-
available-
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
securities
rights
assets
Balance at December 31, 2023
$
606
$
2,500
$
5
$
112
$
167
$
118,109
$
121,499
Gains (losses) included in earnings
-
(500)
-
-
(1)
(3,439)
(3,940)
Gains (losses) included in OCI
1
-
-
-
-
-
1
Additions
-
-
-
-
-
294
294
Settlements
-
-
(5)
(28)
-
-
(33)
Balance at March 31, 2024
$
607
$
2,000
$
-
$
84
$
166
$
114,964
$
117,821
Changes in unrealized gains (losses) included
in earnings relating to assets still held at March
31, 2024
$
-
$
(500)
$
-
$
-
$
2
$
(1,202)
$
(1,700)
94
Quarter ended March 31, 2023
MBS
Other
Other
classified
securities
CMOs
MBS
securities
as debt
classified as
classified
classified
classified
securities
debt securities
as trading
as trading
as trading
Mortgage
available-
available-
account debt
account debt
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
securities
rights
assets
Balance at December 31, 2022
$
711
$
1,000
$
113
$
215
$
207
$
128,350
$
130,596
Gains (losses) included in earnings
-
-
-
(1)
(8)
(1,376)
(1,385)
Gains (losses) included in OCI
(6)
-
-
-
-
-
(6)
Additions
-
-
-
-
-
501
501
Settlements
(50)
-
(25)
(26)
-
-
(101)
Balance at March 31, 2023
$
655
$
1,000
$
88
$
188
$
199
$
127,475
$
129,605
Changes in unrealized gains (losses)
included in earnings relating to assets
still held at March 31, 2023
$
-
$
-
$
-
$
-
$
9
$
1,286
$
1,295
Gains and losses (realized and unrealized) included in earnings for the quarters ended March 31, 2024 and 2023 for Level 3 assets
and liabilities included in the previous tables are reported in the consolidated statements of operations as follows:
Quarter ended March 31, 2024
Quarter ended March 31, 2023
Changes in unrealized
Changes in unrealized
Total gains
gains (losses) relating to
Total gains
gains (losses) relating to
(losses) included
assets still held at
(losses) included
assets still held at
(In thousands)
in earnings
reporting date
in earnings
reporting date
Mortgage banking activities
$
(3,439)
$
(1,202)
$
(1,376)
$
1,286
Trading account (loss) profit
(1)
2
(9)
9
Provision for credit losses
(500)
(500)
-
-
Total
$
(3,940)
$
(1,700)
$
(1,385)
$
1,295
The following tables include quantitative information about significant unobservable inputs used to derive the fair value of Level 3
instruments, excluding those instruments for which the unobservable inputs were not developed by the Corporation such as prices
of prior transactions and/or unadjusted third-party pricing sources at March 31, 2024 and 2023.
Fair value at
(In thousands)
2024
Valuation technique
Unobservable inputs
Weighted average (range) [1]
Other - trading
$
166
Discounted cash flow model
Weighted average life
2.3
Yield
12.0%
Prepayment speed
10.8%
Loans held-in-portfolio
$
110
[2]
External appraisal
Haircut applied on
external appraisals
10.0%
[1]
Weighted average of significant unobservable inputs used to develop Level 3 fair value measurements were calculated by relative fair value.
[2]
Loans held-in-portfolio in which haircuts were not applied to external appraisals were excluded from this table.
Fair value at
(In thousands)
2023
Valuation technique
Unobservable inputs
Weighted average (range) [1]
CMO's - trading
$
88
Discounted cash flow model
Weighted average life
0.3
0.1
0.5
Yield
4.9
% (
4.9
% -
5.4
%)
Prepayment speed
9.2
% (
8.3
% -
27.8
%)
Other - trading
$
199
Discounted cash flow model
Weighted average life
2.5
Yield
12.0%
Prepayment speed
10.8%
Loans held-in-portfolio
$
1,560
[2]
External appraisal
Haircut applied on
external appraisals
35
.0%
[1]
Weighted average of significant unobservable inputs used to develop Level 3 fair value measurements were calculated by relative fair value.
[2]
Loans held-in-portfolio in which haircuts were not applied to external appraisals were excluded from this table.
95
Note 24 – Fair value of financial instruments
The fair value of financial instruments is the amount at which an asset or obligation could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. For those financial instruments with no quoted market prices
available, fair values have been estimated using present value calculations or other valuation techniques, as well as management’s
best judgment with respect to current economic conditions, including discount rates, estimates of future cash flows, and prepayment
assumptions. Many of these estimates involve various assumptions and may vary significantly from amounts that could be realized
in actual transactions.
The fair values reflected herein have been determined based on the prevailing rate environment at March 31, 2024 and December
31, 2023, as applicable. In different interest rate environments, fair value estimates can differ significantly, especially for certain fixed
rate financial instruments. In addition, the fair values presented do not attempt to estimate the value of the Corporation’s fee
generating businesses and anticipated future business activities, that is, they do not represent the Corporation’s value as a going
concern. There have been no changes in the Corporation’s valuation methodologies and inputs used to estimate the fair values for
each class of financial assets and liabilities not measured at fair value.
The following tables present the carrying amount and estimated fair values of financial instruments with their corresponding level in
the fair value hierarchy. The aggregate fair value amounts of the financial instruments disclosed do not represent management’s
estimate of the underlying value of the Corporation.
96
March 31, 2024
Carrying
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
Financial Assets:
Cash and due from banks
$
320,486
$
320,486
$
-
$
-
$
-
$
320,486
Money market investments
5,928,578
5,920,785
7,793
-
-
5,928,578
Trading account debt securities, excluding derivatives
[1]
27,303
8,316
18,737
250
-
27,303
Debt securities available-for-sale
[1]
18,017,424
6,262,480
11,752,337
2,607
-
18,017,424
Debt securities held-to-maturity:
U.S. Treasury securities
$
8,013,952
$
-
$
7,894,800
$
-
$
-
$
7,894,800
Obligations of Puerto Rico, States and political
subdivisions
55,981
-
6,918
49,284
-
56,202
Collateralized mortgage obligation-federal agency
1,536
-
1,364
-
-
1,364
Securities in wholly owned statutory business trusts
5,960
-
5,960
-
-
5,960
Total debt securities held-to-maturity
$
8,077,429
$
-
$
7,909,042
$
49,284
$
-
$
7,958,326
Equity securities:
FHLB stock
$
48,604
$
-
$
48,604
$
-
$
-
$
48,604
FRB stock
99,920
-
99,920
-
-
99,920
Other investments
47,223
-
40,933
6,531
336
47,800
Total equity securities
$
195,747
$
-
$
189,457
$
6,531
$
336
$
196,324
Loans held-for-sale
$
5,352
$
-
$
5,532
$
-
$
-
$
5,532
Loans held-in-portfolio
34,379,194
-
-
33,249,195
-
33,249,195
Mortgage servicing rights
114,964
-
-
114,964
-
114,964
Derivatives
24,045
-
24,045
-
-
24,045
March 31, 2024
Carrying
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
Financial Liabilities:
Deposits:
Demand deposits
$
55,053,712
$
-
$
55,053,712
$
-
$
-
$
55,053,712
Time deposits
8,755,072
-
8,430,548
-
-
8,430,548
Total deposits
$
63,808,784
$
-
$
63,484,260
$
-
$
-
$
63,484,260
Assets sold under agreements to repurchase
$
66,090
$
-
$
66,088
$
-
$
-
$
66,088
Notes payable:
FHLB advances
$
373,665
$
-
$
358,046
$
-
$
-
$
358,046
Unsecured senior debt securities
394,285
-
410,228
-
-
410,228
Junior subordinated deferrable interest debentures
(related to trust preferred securities)
198,353
-
187,383
-
-
187,383
Total notes payable
$
966,303
$
-
$
955,657
$
-
$
-
$
955,657
Derivatives
$
21,784
$
-
$
21,784
$
-
$
-
$
21,784
[1]
Refer to Note 23 to the Consolidated Financial Statements for the fair value by class of financial asset and its hierarchy level.
97
December 31, 2023
Carrying
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
Financial Assets:
Cash and due from banks
$
420,462
$
420,462
$
-
$
-
$
-
$
420,462
Money market investments
6,998,871
6,991,758
7,113
-
-
6,998,871
Trading account debt securities, excluding derivatives
[1]
31,568
16,859
14,425
284
-
31,568
Debt securities available-for-sale
[1]
16,729,044
3,936,036
12,789,902
3,106
-
16,729,044
Debt securities held-to-maturity:
U.S. Treasury securities
$
8,121,411
$
-
$
8,092,339
$
-
$
-
$
8,092,339
Obligations of Puerto Rico, States and political
subdivisions
59,628
-
7,007
52,671
-
59,678
Collateralized mortgage obligation-federal agency
1,556
-
1,395
13
-
1,408
Securities in wholly owned statutory business trusts
5,960
-
5,960
-
-
5,960
Total debt securities held-to-maturity
$
8,188,555
$
-
$
8,106,701
$
52,684
$
-
$
8,159,385
Equity securities:
FHLB stock
$
49,549
$
-
$
49,549
$
-
$
-
$
49,549
FRB stock
98,948
-
98,948
-
-
98,948
Other investments
45,229
-
37,965
7,869
310
46,144
Total equity securities
$
193,726
$
-
$
186,462
$
7,869
$
310
$
194,641
Loans held-for-sale
$
4,301
$
-
$
4,328
$
-
$
-
$
4,328
Loans held-in-portfolio
34,335,630
-
-
33,376,255
-
33,376,255
Mortgage servicing rights
118,109
-
-
118,109
-
118,109
Derivatives
24,419
-
24,419
-
-
24,419
December 31, 2023
Carrying
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
Financial Liabilities:
Deposits:
Demand deposits
$
55,116,351
$
-
$
55,116,351
$
-
$
-
$
55,116,351
Time deposits
8,501,892
-
8,154,823
-
-
8,154,823
Total deposits
$
63,618,243
$
-
$
63,271,174
$
-
$
-
$
63,271,174
Assets sold under agreements to repurchase
$
91,384
$
-
$
91,386
$
-
$
-
$
91,386
Notes payable:
FHLB advances
$
394,665
$
-
$
377,851
$
-
$
-
$
377,851
Unsecured senior debt securities
393,937
-
400,848
-
-
400,848
Junior subordinated deferrable interest debentures
(related to trust preferred securities)
198,346
-
180,076
-
-
180,076
Total notes payable
$
986,948
$
-
$
958,775
$
-
$
-
$
958,775
Derivatives
$
21,103
$
-
$
21,103
$
-
$
-
$
21,103
[1]
Refer to Note 23 to the Consolidated Financial Statements for the fair value by class of financial asset and its hierarchy level.
The notional amount of commitments to extend credit at March 31, 2024 and December 31, 2023 was $
11
10
respectively, and represented the unused portion of credit facilities granted to customers. The notional amount of letters of credit at
March 31, 2024 and December 31, 2023 was $
117
82
that is required to be paid in the event of nonperformance. The fair value of commitments to extend credit and letters of credit, which
are based on the fees charged to enter into those agreements, are not material to Popular’s financial statements.
98
Note 25 – Net income per common share
The following table sets forth the computation of net income per common share (“EPS”), basic and diluted, for the quarters ended
March 31, 2024 and 2023
:
Quarters ended March 31,
(In thousands, except per share information)
2024
2023
Net income
$
103,283
$
158,979
Preferred stock dividends
(353)
(353)
Net income applicable to common stock
$
102,930
$
158,626
Average common shares outstanding
71,869,735
71,541,778
Average potential dilutive common shares
97,068
64,418
Average common shares outstanding - assuming dilution
71,966,803
71,606,196
Basic EPS
$
1.43
$
2.22
Diluted EPS
$
1.43
$
2.22
For the quarters ended March 31, 2024 and 2023, the Corporation calculated the impact of potential dilutive common shares under
the treasury stock method, consistent with the method used for the preparation of the financial statements for the year ended
December 31, 2023. For a discussion of the calculation under the treasury stock method, refer to Note 31 of the Consolidated
Financial Statements included in the 2023 Form 10-K.
99
Note 26 – Revenue from contracts with customers
The following table presents the Corporation’s revenue streams from contracts with customers by reportable segment for the
quarters ended March 31, 2024 and 2023
.
Quarters ended March 31,
(In thousands)
2024
2023
BPPR
Popular U.S.
BPPR
Popular U.S.
Service charges on deposit accounts
$
35,016
$
2,426
$
32,152
$
2,526
Other service fees:
Debit card fees
14,049
199
12,948
218
Insurance fees, excluding reinsurance
10,556
1,846
10,798
1,307
Credit card fees, excluding late fees and membership fees
35,800
458
36,174
579
Sale and administration of investment products
7,427
-
6,558
-
Trust fees
6,985
-
5,896
-
Total revenue from contracts with customers
[1]
$
109,833
$
4,929
$
104,526
$
4,630
[1] The amounts include intersegment transactions of $
0.6
1.6
Revenue from contracts with customers is recognized when, or as, the performance obligations are satisfied by the Corporation by
transferring the promised services to the customers. A service is transferred to the customer when, or as, the customer obtains
control of that service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance
obligation satisfied over time is recognized based on the services that have been rendered to date. Revenue from a performance
obligation satisfied at a point in time is recognized when the customer obtains control over the service. The transaction price, or the
amount of revenue recognized, reflects the consideration the Corporation expects to be entitled to in exchange for those promised
services. In determining the transaction price, the Corporation considers the effects of variable consideration. Variable consideration
is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur. The Corporation is the principal in a transaction if it obtains control of the specified goods or services
before they are transferred to the customer. If the Corporation acts as principal, revenues are presented in the gross amount of
consideration to which it expects to be entitled and are not netted with any related expenses. On the other hand, the Corporation is
an agent if it does not control the specified goods or services before they are transferred to the customer. If the Corporation acts as
an agent, revenues are presented in the amount of consideration to which it expects to be entitled, net of related expenses.
Following is a description of the nature and timing of revenue streams from contracts with customers:
Service charges on deposit accounts
Service charges on deposit accounts are earned on retail and commercial deposit activities and include, but are not limited to,
nonsufficient fund fees, overdraft fees and checks stop payment fees. These transaction-based fees are recognized at a point in
time, upon occurrence of an activity or event or upon the occurrence of a condition which triggers the fee assessment. The
Corporation is acting as principal in these transactions.
Debit card fees
Debit card fees include, but are not limited to, interchange fees, surcharging income and foreign transaction fees. These transaction-
based fees are recognized at a point in time, upon occurrence of an activity or event or upon the occurrence of a condition which
triggers the fee assessment. Interchange fees are recognized upon settlement of the debit card payment transactions. The
Corporation is acting as principal in these transactions.
Insurance fees
Insurance fees include, but are not limited to, commissions and contingent commissions. Commissions and fees are recognized
when related policies are effective since the Corporation does not have an enforceable right to payment for services completed to
date. An allowance is created for expected adjustments to commissions earned related to policy cancellations. Contingent
commissions are recorded on an accrual basis when the amount to be received is notified by the insurance company. The
100
Corporation is acting as an agent since it arranges for the sale of the policies and receives commissions if, and when, it achieves
the sale.
Credit card fees
Credit card fees include, but are not limited to, interchange fees, additional card fees, cash advance fees, balance transfer fees,
foreign transaction fees, and returned payments fees. Credit card fees are recognized at a point in time, upon the occurrence of an
activity or an event. Interchange fees are recognized upon settlement of the credit card payment transactions. The Corporation is
acting as principal in these transactions.
Sale and administration of investment products
Fees from the sale and administration of investment products include, but are not limited to, commission income from the sale of
investment products, asset management fees, underwriting fees, and mutual fund fees.
Commission income from investment products is recognized on the trade date since clearing, trade execution, and custody services
are satisfied when the customer acquires or disposes of the rights to obtain the economic benefits of the investment products and
brokerage contracts have no fixed duration and are terminable at will by either party. The Corporation is acting as principal in these
transactions since it performs the service of providing the customer with the ability to acquire or dispose of the rights to obtain the
economic benefits of investment products.
Asset management fees are satisfied over time and are recognized in arrears. At contract inception, the estimate of the asset
management fee is constrained from the inclusion in the transaction price since the promised consideration is dependent on the
market and thus is highly susceptible to factors outside the manager’s influence. As advisor, the broker-dealer subsidiary is acting
as principal.
Underwriting fees are recognized at a point in time, when the investment products are sold in the open market at a markup. When
the broker-dealer subsidiary is lead underwriter, it is acting as an agent. In turn, when it is a participating underwriter, it is acting as
principal.
Mutual fund fees, such as distribution fees, are considered variable consideration and are recognized over time, as the uncertainty
of the fees to be received is resolved as NAV is determined and investor activity occurs. The promise to provide distribution-related
services is considered a single performance obligation as it requires the provision of a series of distinct services that are
substantially the same and have the same pattern of transfer. When the broker-dealer subsidiary is acting as a distributor, it is acting
as principal. In turn, when it acts as third-party dealer, it is acting as an agent.
Trust fees
Trust fees are recognized from retirement plan, mutual fund administration, investment management, trustee, escrow, and custody
and safekeeping services. These asset management services are considered a single performance obligation as it requires the
provision of a series of distinct services that are substantially the same and have the same pattern of transfer. The performance
obligation is satisfied over time, except for optional services and certain other services that are satisfied at a point in time.
Revenues are recognized in arrears, when, or as, the services are rendered. The Corporation is acting as principal since, as asset
manager, it has the obligation to provide the specified service to the customer and has the ultimate discretion in establishing the fee
paid by the customer for the specified services.
101
Note 27 – Leases
The Corporation enters in the ordinary course of business into operating and finance leases for land, buildings and equipment.
These contracts generally do not include purchase options or residual value guarantees. The remaining lease terms of
0.1
30.8
years considers options to extend the leases for up to
20
obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.
The Corporation recognizes right-of-use assets (“ROU assets”) and lease liabilities related to operating and finance leases in its
Consolidated Statements of Financial Condition under the caption of other assets and other liabilities, respectively. Refer to Note 12
and Note 16 to the Consolidated Financial Statements, respectively, for information on the balances of these lease assets and
liabilities.
The Corporation uses the incremental borrowing rate for purposes of discounting lease payments for operating and finance leases,
since it does not have enough information to determine the rates implicit in the leases. The discount rates are based on fixed-rate
and fully amortizing borrowing facilities of its banking subsidiaries that are collateralized. For leases held by non-banking
subsidiaries, a credit spread is added to this rate based on financing transactions with a similar credit risk profile.
The following table presents the undiscounted cash flows of operating and finance leases for each of the following periods:
March 31, 2024
(In thousands)
Remaining
2024
2025
2026
2027
2028
Later
Years
Total Lease
Payments
Less: Imputed
Interest
Total
Operating Leases
$
23,167
$
28,327
$
19,932
$
14,531
$
12,074
40,740
$
138,771
$
(17,438)
$
121,333
Finance Leases
3,380
4,605
4,374
3,017
2,344
10,434
28,154
(3,257)
24,897
The following table presents the lease cost recognized by the Corporation in the Consolidated Statements of Operations as follows:
Quarters ended March 31,
(In thousands)
2024
2023
Finance lease cost:
Amortization of ROU assets
$
748
$
824
Interest on lease liabilities
237
296
Operating lease cost
7,688
7,854
Short-term lease cost
116
73
Variable lease cost
69
56
Sublease income
(20)
(9)
Total lease cost
[1]
$
8,838
$
9,094
[1]
Total lease cost is recognized as part of net occupancy expense.
102
The following table presents supplemental cash flow information and other related information related to operating and finance
leases.
Quarters ended March 31,
(Dollars in thousands)
2024
2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
7,771
$
7,754
Operating cash flows from finance leases
237
296
Financing cash flows from finance leases
881
804
ROU assets obtained in exchange for new lease obligations:
Operating leases
$
1,127
$
967
Finance leases
-
1,796
Weighted-average remaining lease term:
Operating leases
7.2
years
7.3
years
Finance leases
8.2
years
8.2
years
Weighted-average discount rate:
Operating leases
3.3
%
3.0
%
Finance leases
3.8
%
4.1
%
As of March 31, 2024, the Corporation had additional operating leases contracts that have not yet commenced with an undiscounted
contract amount of $
3.9
10
20
103
Note 28 – Pension and postretirement benefits
The Corporation has a non-contributory defined benefit pension plan and supplementary pension benefit restoration plans for
regular employees of certain of its subsidiaries (the “Pension Plans”). The accrual of benefits under the Pension Plans is frozen to
all participants. The Corporation also provides certain postretirement health care benefits for retired employees of certain
subsidiaries (the “OPEB Plan”).
The components of net periodic cost for the Pension Plans and the OPEB Plan for the periods presented were as follows:
Pension Plans
OPEB Plan
Quarter ended March 31,
Quarter ended March 31,
(In thousands)
2024
2023
2024
2023
Personnel Cost:
$
-
$
-
$
32
$
48
Other operating expenses:
7,558
7,887
1,421
1,520
(8,594)
(8,591)
-
-
-
-
-
-
4,166
5,366
(548)
(553)
Total net periodic pension cost
$
3,130
$
4,662
$
905
$
1,015
The Corporation paid the following contributions to the plans for the quarter ended March 31, 2024 and expects to pay the following
contributions for the year ending December 31, 2024.
For the quarter ended
For the year ending
(In thousands)
March 31, 2024
December 31, 2024
Pension Plans
$
57
$
228
OPEB Plan
$
1,597
$
5,744
104
Note 29 - Stock-based compensation
On May 12, 2020, the stockholders of the Corporation approved the Popular, Inc. 2020 Omnibus Incentive Plan, which permits the
Corporation to issue several types of stock-based compensation to employees and directors of the Corporation and/or any of its
subsidiaries (the “2020 Incentive Plan”). The 2020 Incentive Plan replaced the Popular, Inc. 2004 Omnibus Incentive Plan, which
was in effect prior to the adoption of the 2020 Incentive Plan (the “2004 Incentive Plan” and, together with the 2020 Incentive Plan,
the “Incentive Plan”). Participants under the Incentive Plan are designated by the Talent and Compensation Committee of the Board
of Directors (or its delegate, as determined by the Board). Under the Incentive Plan, the Corporation has issued restricted stock and
performance shares to its employees and restricted stock and restricted stock units (“RSUs”) to its directors.
The restricted stock granted under the Incentive Plan to employees becomes vested based on the employees’ continued service
with Popular.
Unless otherwise stated in an agreement, the compensation cost associated with the shares of restricted stock
granted prior to 2021 was determined based on a two-prong vesting schedule. The first part is vested ratably over five or four years
commencing at the date of grant (“the graduated vesting portion”) and the second part is vested at termination of employment after
attainment of 55 years of age and 10 years of service or 60 years of age and 5 years of service (“the retirement vesting portion”).
The graduated vesting portion is accelerated at termination of employment after attaining the earlier of 55 years of age and 10 years
of service or 60 years of age and 5 years of service. Restricted stock granted on or after 2021 will vest ratably in equal annual
installments over a period of 4 years or 3 years, depending on the classification of the employee. The vesting schedule is
accelerated at termination of employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age
and 5 years of service.
The performance share awards granted under the Incentive Plan consist of the opportunity to receive shares of Popular, Inc.’s
common stock provided that the Corporation achieves certain goals during a three-year performance cycle. The goals will be based
on two metrics weighted equally: the Relative Total Shareholder Return (“TSR”) and the Absolute Return on Average Tangible
Common Equity (“ROATCE”). The TSR metric is considered to be a market condition under ASC 718. For equity settled awards
based on a market condition, the fair value is determined as of the grant date and is not subsequently revised based on actual
performance. The ROATCE metric is considered to be a performance condition under ASC 718. The fair value is determined
based on the probability of achieving the ROATCE goal as of each reporting period. The TSR and ROATCE metrics are equally
weighted and work independently.
The number of shares that will ultimately vest ranges from 50% to a 150% of target based on
both market (TSR) and performance (ROATCE) conditions. The performance shares vest at the end of the three-year performance
cycle. If a participant terminates employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age
and 5 years of service, the performance shares shall continue outstanding and vest at the end of the performance cycle.
The following table summarizes the restricted stock and performance shares activity under the Incentive Plan for members of
management.
105
(Not in thousands)
Shares
Weighted-Average
Grant Date Fair
Value
Non-vested at December 31, 2022
281,963
$
56.50
Granted
257,757
66.01
Performance Shares Quantity Adjustment
19,753
75.32
Vested
(243,133)
66.31
Forfeited
(16,444)
55.82
Non-vested at December 31, 2023
299,896
$
58.20
Granted
143,084
85.57
Performance Shares Quantity Adjustment
33,858
88.92
Vested
(185,177)
79.81
Forfeited
411
69.92
Non-vested at March 31, 2024
292,072
$
61.48
During the quarter ended March 31, 2024,
77,859
69,488
) and
65,225
shares (March 31, 2023 -
57,715
) were awarded to management under the Incentive Plan.
During the quarter ended March 31, 2024, the Corporation recognized $
6.4
management incentive awards, with a tax benefit of $
0.6
4.4
0.3
the quarter ended March 31, 2024, the fair market value of the restricted stock and performance shares vested was $
9.5
grant date and $
13.2
1.4
recorded as a reduction in income tax expense. For the quarter ended March 31, 2024, the Corporation recognized $
5.0
performance shares expense, with a tax benefit of $
0.3
3.6
0.1
total unrecognized compensation cost related to non-vested restricted stock awards and performance shares to members of
management at March 31, 2024 was $
11.4
1.79
The following table summarizes the restricted stock activity under the Incentive Plan for members of the Board of Directors:
(Not in thousands)
RSUs / Unrestricted stock
Weighted-Average Grant
Date Fair Value per Unit
Non-vested at December 31, 2022
-
$
-
Granted
39,104
55.30
Vested
(39,104)
55.30
Forfeited
-
-
Non-vested at December 31, 2023
-
$
-
Granted
1,195
82.08
Vested
(1,195)
82.08
Forfeited
-
-
Non-vested at March 31, 2024
-
$
-
The equity awards granted to members of the Board of Directors of Popular, Inc. (the “Directors”) will vest and become non-
forfeitable on the grant date of such award. Effective in May 2019 all equity awards granted to the Directors may be paid in either
common stock or RSUs, at the Directors’ election. If RSUs are elected the Directors may defer the delivery of the shares of common
stock underlying the RSUs award after their retirement. To the extent that cash dividends are paid on the Corporation’s outstanding
common stock, the Directors will receive an additional number of RSUs that reflect reinvested dividend equivalent.
During the quarter ended March 31, 2024,
1,195
1,029
). During this period,
the Corporation recognized $
98
18
(March 31, 2023 - $
67
13
quarter ended March 31, 2024 for Directors was $
98
.
106
Note 30 – Income taxes
The reason for the difference between the income tax expense applicable to income before provision for income taxes and the
amount computed by applying the statutory tax rate in Puerto Rico, were as follows:
Quarters ended
March 31, 2024
March 31, 2023
(In thousands)
Amount
% of pre-tax
income
Amount
% of pre-tax
income
Computed income tax expense at statutory rates
$
59,569
38
%
$
76,985
38
%
Net benefit of tax exempt interest income
(28,759)
(18)
(21,902)
(11)
Effect of income subject to preferential tax rate
(1,420)
(1)
(855)
-
Deferred tax asset valuation allowance
2,563
1
(4,565)
(2)
Difference in tax rates due to multiple jurisdictions
(673)
-
(5,169)
(3)
Tax on intercompany distributions
[1]
24,325
16
-
-
U.S., States, and local taxes
1,036
-
3,355
2
Others
(1,073)
(1)
(1,535)
(1)
Income tax expense
$
55,568
35
%
$
46,314
23
%
[1]
Includes $
16.5
For the quarter ended March 31, 2024, the Corporation recorded an income tax expense of $
55.6
46.3
for the quarter ended March 31, 2023. As discussed in Note 2, the tax expense for the first quarter of 2024 includes $
23.0
related to intercompany distributions, out of which $
16.5
Corporation’s U.S. subsidiary’s non-payment of taxes on certain intercompany distributions to the Bank Holding Company (BHC) in
Puerto Rico, a foreign corporation for U.S. tax purposes. During years 2023 and 2022, $
5.5
5.4
should have been recognized as additional income tax expense, and an aggregate of $
5.6
result of this adjustment, the deferred tax assets related to NOL of the BHC and its related valuation allowance was reduced by
$
53.7
6.5
reflect the U.S. federal tax withholding liability and estimated related Puerto Rico income tax arising from a $
50
during the quarter. During the quarter ended March 31, 2023, the Corporation reported a reversal of a valuation allowance on a tax
credit expected to be realized on the U.S. operations.
The following table presents a breakdown of the significant components of the Corporation’s deferred tax assets and liabilities.
107
March 31, 2024
PR
US
Total
Deferred tax assets:
Tax credits available for carryforward
$
263
$
10,749
$
11,012
Net operating loss and other carryforward available
53,852
619,457
673,309
Postretirement and pension benefits
37,314
-
37,314
Allowance for credit losses
246,566
29,866
276,432
Depreciation
6,774
6,651
13,425
FDIC-assisted transaction
152,665
-
152,665
Lease liability
28,280
19,272
47,552
Unrealized net loss on investment securities
309,191
20,406
329,597
Difference in outside basis from pass-through entities
44,008
-
44,008
Mortgage Servicing Rights
14,378
-
14,378
Other temporary differences
49,600
10,041
59,641
Total gross deferred tax assets
942,891
716,442
1,659,333
Deferred tax liabilities:
Intangibles
85,564
52,715
138,279
Right of use assets
25,839
16,940
42,779
Deferred loan origination fees/cost
(823)
2,085
1,262
Loans acquired
19,703
-
19,703
Other temporary differences
6,854
422
7,276
Total gross deferred tax liabilities
137,137
72,162
209,299
Valuation allowance
71,380
378,910
450,290
Net deferred tax asset
$
734,374
$
265,370
$
999,744
PR
US
Total
Deferred tax assets:
Tax credits available for carryforward
$
263
$
10,281
$
10,544
Net operating loss and other carryforward available
122,634
620,982
743,616
Postretirement and pension benefits
38,121
-
38,121
Allowance for credit losses
244,956
28,222
273,178
Depreciation
6,774
6,578
13,352
FDIC-assisted transaction
152,665
-
152,665
Lease liability
29,070
20,492
49,562
Unrealized net loss on investment securities
312,583
19,037
331,620
Difference in outside basis from pass-through entities
46,056
-
46,056
Mortgage Servicing Rights
14,085
-
14,085
Other temporary differences
47,679
9,625
57,304
Total gross deferred tax assets
1,014,886
715,217
1,730,103
Deferred tax liabilities:
Intangibles
84,635
51,944
136,579
Right of use assets
26,648
18,030
44,678
Deferred loan origination fees/cost
(1,056)
1,486
430
Loans acquired
20,430
-
20,430
Other temporary differences
6,402
422
6,824
Total gross deferred tax liabilities
137,059
71,882
208,941
Valuation allowance
139,347
374,035
513,382
Net deferred tax asset
$
738,480
$
269,300
$
1,007,780
108
The net deferred tax assets shown in the table above at March 31, 2024, is reflected in the consolidated statements of financial
condition as $
1.0
1.0
1.3
deferred tax liabilities in the “Other liabilities” caption (December 31, 2023 - $
1.3
assets or liabilities of individual tax-paying subsidiaries of the Corporation in their respective tax jurisdiction, Puerto Rico or the
United States.
At March 31, 2024, the net deferred tax assets of the U.S. operations amounted to $
644
approximately $
379
265
evaluates the realization of the deferred tax assets on a quarterly basis by taxing jurisdiction. The U.S. operation has sustained
profitability for the last three calendar years and for the quarter ended March 31, 2024. These historical financial results are
objectively verifiable positive evidence, evaluated together with the positive evidence of stable credit metrics, in combination with the
length of the expiration of the NOLs. On the other hand, the Corporation evaluated the negative evidence accumulated over the
years, including financial results lower than expectations and challenges to the economy due to inflationary pressures and global
geopolitical uncertainty that have resulted in a trend of reduction of pre-tax income over the last three years. As of March 31, 2024,
after weighting all positive and negative evidence, the Corporation concluded that it is more likely than not that approximately $
265
million of the deferred tax assets from the U.S. operations, comprised mainly of net operating losses, will be realized. The
Corporation based this determination on its estimated earnings available to realize the deferred tax assets for the remaining
carryforward period, together with the historical level of book income adjusted by permanent differences. Management will continue
to monitor and review the U.S. operation’s results, including recent earnings trends, the pre-tax earnings forecast, any new tax
initiative, and other factors, including net income versus forecast, targeted loan growth, net interest income margin, changes in
deposit costs, allowance for credit losses, charge offs, NPLs inflows and NPA balances. Significant adverse changes or a
combination of changes in these factors could impact the future realization of the deferred tax assets.
At March 31, 2024, the Corporation’s net deferred tax assets related to its Puerto Rico operations amounted to $
734
Corporation’s Puerto Rico Banking operation has a historical record of profitability. This is considered a strong piece of objectively
verifiable positive evidence that outweighs any negative evidence considered by Management in the evaluation of the realization of
the deferred tax assets. Based on this evidence and management’s estimate of future taxable income, the Corporation has
concluded that it is more likely than not that such net deferred tax assets of the Puerto Rico Banking operations will be realized.
The Holding Company operation has been in a cumulative loss position in recent years. Management expects these losses will be a
trend in future years. This objectively verifiable negative evidence is considered by Management strong negative evidence that
suggests that income in future years will be insufficient to support the realization of all deferred tax assets. After weighting of all
positive and negative evidence Management concluded, as of the reporting date, that it is more likely than not that the Holding
Company will not be able to realize any portion of the deferred tax assets. Accordingly, the Corporation has maintained a valuation
allowance on the deferred tax assets of $
71
The reconciliation of unrecognized tax benefits, excluding interest, was as follows:
109
(In millions)
2024
2023
Balance at January 1
$
1.5
$
2.5
Balance at March 31
$
1.5
$
2.5
At March 31, 2024, the total amount of accrued interest recognized in the statement of financial condition amounted to $
2.3
(December 31, 2023 - $
2.3
30
$
56
no
payment of penalties. The Corporation’s policy is to report interest related to unrecognized tax benefits in income tax expense, while
the penalties, if any, are reported in other operating expenses in the consolidated statements of operations.
After consideration of the effect on U.S. federal tax of unrecognized U.S. state tax benefits, the total amount of unrecognized tax
benefits, including U.S. and Puerto Rico, that if recognized, would affect the Corporation’s effective tax rate, was approximately $
2.9
million at March 31, 2024 (December 31, 2023 - $
2.9
The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for
current tax year positions, expiration of open income tax returns due to the statutes of limitation, changes in Management’s
judgment about the level of uncertainty, status of examinations, litigation and legislative activity and the addition or elimination of
uncertain tax positions. The Corporation does not anticipate a reduction in the total amount of unrecognized tax benefits within the
next 12 months.
The Corporation and its subsidiaries file income tax returns in Puerto Rico, the U.S. federal jurisdiction, various U.S. states and
political subdivisions, and foreign jurisdictions. At March 31, 2024, the following years remain subject to examination in the U.S.
Federal jurisdiction: 2020 and thereafter; and in the Puerto Rico jurisdiction, 2018 and thereafter.
110
Note 31 – Supplemental disclosure on the consolidated statements of cash flows
Additional disclosures on cash flow information and non-cash activities for the quarters ended March 31, 2024 and March 31, 2023
are listed in the following table:
(In thousands)
March 31, 2024
March 31, 2023
Non-cash activities:
$
16,133
$
18,367
20,224
17,343
36,357
35,710
13,464
2,778
2,725
3,203
13,689
13,232
16,414
16,435
22,495
14,105
2,763
2,475
1,722
1,500
[1]
2,205
10,966
45
10,307
45
402
125,000
99,620
294
501
2,181
855
1,152
2,699
[1]
Includes loans securitized into trading securities and subsequently sold before quarter end.
The following table provides a reconciliation of cash and due from banks, and restricted cash reported within the Consolidated
Statement of Financial Condition that sum to the total of the same such amounts shown in the Consolidated Statement of Cash
Flows.
(In thousands)
March 31, 2024
March 31, 2023
Cash and due from banks
$
305,869
$
427,160
Restricted cash and due from banks
14,617
34,853
Restricted cash in money market investments
7,793
7,173
Total cash and due from banks, and restricted cash
[2]
$
328,279
$
469,186
[2]
Refer to Note 4 - Restrictions on cash and due from banks and certain securities for nature of restrictions.
111
Note 32 – Segment reporting
The Corporation’s corporate structure consists of
two
Banco Popular de Puerto Rico and Popular U.S.
Management determined the reportable segments based on the internal reporting used to evaluate performance and to assess
where to allocate resources.
markets the segments serve, as well as on the products and services offered by the segments.
Banco Popular de Puerto Rico:
The Banco Popular de Puerto Rico reportable segment includes commercial, consumer and retail banking operations conducted at
BPPR, including U.S. based activities conducted through its New York Branch. It also includes the lending operations of Popular
Auto and Popular Mortgage. Other financial services within the BPPR segment include the trust service units of BPPR, asset
management services of Popular Asset Management, the brokerage and investment banking operations of Popular Securities, and
the insurance agency and reinsurance businesses of Popular Insurance, Popular Risk Services, Popular Life Re, and Popular Re.
Popular U.S.:
Popular U.S. reportable segment consists of the banking operations of Popular Bank (PB), Popular Insurance Agency, U.S.A., and
PEF. PB operates through a retail branch network in the U.S. mainland under the name of Popular, and equipment leasing and
financing services through PEF. Popular Insurance Agency, U.S.A. offers investment and insurance services across the PB branch
network.
The Corporate group consists primarily of the holding companies Popular, Inc., Popular North America, Popular International Bank
and certain of the Corporation’s investments accounted for under the equity method, including Centro Financiero BHD, León.
The accounting policies of the individual operating segments are the same as those of the Corporation. Transactions between
reportable segments are primarily conducted at market rates, resulting in profits that are eliminated for reporting consolidated results
of operations.
The tables that follow present the results of operations and total assets by reportable segments:
112
2024
For the quarter ended March 31, 2024
Intersegment
(In thousands)
BPPR
Popular U.S.
Eliminations
Net interest income
$
472,841
$
84,853
$
-
Provision for credit losses
60,680
11,435
-
Non-interest income
145,669
7,120
(56)
Amortization of intangibles
484
311
-
Depreciation expense
13,009
1,943
-
Other operating expenses
393,805
67,788
(56)
Income tax expense
29,206
3,456
-
Net income
$
121,326
$
7,040
$
-
Segment assets
$
57,250,662
$
13,686,037
$
(359,383)
For the quarter ended March 31, 2024
Reportable
(In thousands)
Segments
Corporate
Eliminations
Total Popular, Inc.
Net interest income (expense)
$
557,694
$
(6,950)
$
-
$
550,744
Provision for credit losses
72,115
483
-
72,598
Non-interest income
152,733
11,722
(637)
163,818
Amortization of intangibles
795
-
-
795
Depreciation expense
14,952
409
-
15,361
Other operating expenses
461,537
6,611
(1,191)
466,957
Income tax expense
32,662
22,676
230
55,568
Net income (loss)
$
128,366
$
(25,407)
$
324
$
103,283
Segment assets
$
70,577,316
$
5,723,198
$
(5,363,575)
$
70,936,939
2023
For the quarter ended March 31, 2023
Intersegment
(In thousands)
BPPR
Eliminations
Net interest income
$
449,820
$
90,086
$
1
Provision for credit losses
45,708
2,065
-
Non-interest income
147,471
6,384
(136)
Amortization of intangibles
484
311
-
Depreciation expense
11,669
1,814
-
Other operating expenses
363,715
63,317
(136)
Income tax expense
42,832
3,976
-
Net income
$
132,883
$
24,987
$
1
Segment assets
$
55,770,442
$
12,147,556
$
(541,534)
For the quarter ended March 31, 2023
Reportable
(In thousands)
Segments
Corporate
Eliminations
Total Popular, Inc.
Net interest income (expense)
$
539,907
$
(8,251)
$
-
$
531,656
Provision for credit losses (benefit)
47,773
(136)
-
47,637
Non-interest income
153,719
9,714
(1,472)
161,961
Amortization of intangibles
795
-
-
795
Depreciation expense
13,483
359
-
13,842
Other operating expenses
426,896
230
(1,076)
426,050
Income tax expense (benefit)
46,808
(321)
(173)
46,314
Net income
$
157,871
$
1,331
$
(223)
$
158,979
Segment assets
$
67,376,464
$
5,803,751
$
(5,504,456)
$
67,675,759
113
Geographic Information
The following information presents selected financial information based on the geographic location where the Corporation conducts
its business. The banking operations of BPPR are primarily based in Puerto Rico, where it has the largest retail banking franchise.
BPPR also conducts banking operations in the U.S. Virgin Islands, the British Virgin Islands and New York. BPPR’s banking
operations in the mainland United States include commercial lending activities. BPPR’s commercial lending activities in the U.S.,
through its New York Branch, include periodic loan participations with PB. During the quarter ended March 31, 2024, BPPR did
no
t
participate in loans originated by PB (March 31, 2023 - $
23
the United States amounted to $
1.5
1.5
106
31, 2023 - $
106
526
528
592
(December 31, 2023 - $
557
198
229
quarter ended March 31, 2024, the BPPR segment generated approximately $
29.8
25.4
revenues from its operations in the United States, including net interest income and other service fees. In the Virgin Islands, the
BPPR segment offers banking products, including loans and deposits. The BPPR segment generated $
10.6
during the first quarter of 2024 (March 31, 2023 - $
11.6
Geographic Information
Quarter ended
(In thousands)
March 31, 2024
March 31, 2023
Revenues:
[1]
$
565,744
$
547,903
126,741
125,045
22,077
20,669
Total consolidated revenues
$
714,562
$
693,617
[1]
Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net gain,
including impairment on equity securities, net gain on trading account debt securities, adjustments to indemnity reserves on loans sold and
other operating income.
Selected Balance Sheet Information:
(In thousands)
March 31, 2024
December 31, 2023
Puerto Rico
Total assets
$
54,507,722
$
54,181,300
Loans
22,649,624
22,519,961
Deposits
51,350,879
51,282,007
United States
Total assets
$
15,186,839
$
15,343,156
Loans
11,931,955
12,006,012
Deposits
10,716,008
10,643,602
Other
Total assets
$
1,242,378
$
1,233,699
Loans
542,511
543,299
Deposits
[1]
1,741,897
1,692,634
[1]
Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.
114
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report includes management’s discussion and analysis (“MD&A”) of the consolidated financial position and financial
performance of Popular, Inc. (the “Corporation” or “Popular”). All accompanying tables, financial statements and notes included
elsewhere in this report should be considered an integral part of this analysis.
The Corporation is a diversified, publicly-owned financial holding company subject to the supervision and regulation of the Board of
Governors of the Federal Reserve System. The Corporation has operations in Puerto Rico, the United States (“U.S.”) mainland and
the U.S. and British Virgin Islands. In Puerto Rico, the Corporation provides retail, mortgage and commercial banking services
through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as investment banking, broker-dealer, auto
and equipment leasing and financing, and insurance services through specialized subsidiaries. In the U.S. mainland, the
Corporation provides retail, mortgage and commercial banking services, as well as equipment leasing and financing, through its
New York-chartered banking subsidiary, Popular Bank (“PB” or “Popular U.S.”), which has branches located in New York, New
Jersey and Florida. Note 32 to the Consolidated Financial Statements presents information about the Corporation’s business
segments.
SIGNIFICANT EVENTS
FDIC Special Assessment Increase in Estimate
On November 16, 2023, the Federal Deposit Insurance Corporation (“FDIC”) approved a final rule that imposes a special
assessment (the “FDIC Special Assessment”) to recover the losses to the deposit insurance fund resulting from the FDIC’s use, in
March 2023, of the systemic risk exception to the least-cost resolution test under the Federal Deposit Insurance Act in connection
with the receiverships of several failed banks. In connection with this assessment, the Corporation recorded an expense of
$71.4 million, $45.3 million net of tax, in the fourth quarter of 2023, representing the full amount of the estimated assessment at that
time.
During the quarter ended March 31, 2024, the Corporation recorded an additional expense of $14.3 million, $9.1 million net of tax, to
reflect the FDIC's higher loss estimate which increased from $16.3 billion, when approved, to $20.4 billion during the quarter. The
special assessment amount and collection period may change as the estimated loss is periodically adjusted or if the total amount
collected varies.
Tax impact on Intercompany Distributions
The net income for the quarter ended March 31, 2024, included $22.9 million of expenses, of which $16.5 million is reflected in
income tax expense and $6.4 million is reflected in other operating expenses, related to an out-of-period adjustment associated
with the Corporation’s U.S. subsidiary’s non-payment of taxes on certain intercompany distributions to the Bank Holding Company
(BHC) in Puerto Rico, a foreign corporation for U.S. tax purposes. The adjustment corrected errors for income tax expense that
should have been recognized of $5.5 million and $5.4 million in the years 2023 and 2022, respectively, and an aggregate of $5.6
million, in the years prior to 2022. The $6.4 million recognized as other operating expense corresponded to interest due up to March
31, 2024 on the related late payment of the withholding tax, of which approximately $3.0 million correspond to years prior to 2022.
As a result of this adjustment, the deferred tax asset related to NOL of the BHC and its related valuation allowance was reduced by
$53.7 million. The Corporation evaluated the impact of the out-of-period adjustment and concluded it was not material to any
previously issued interim or annual consolidated financial statements and the adjustment is not expected to be material to the year
ending December 31, 2024.
The Corporation also recognized $6.5 million in income tax expense during the quarter ended March 31, 2024 to reflect the U.S.
federal tax withholding liability and estimated related Puerto Rico income tax arising from a $50 million dividend paid during the
quarter.
Dividends from the U.S. subsidiaries to the BHC are subject to a Federal 10% withholding tax and ordinary income tax in Puerto
Rico, subject to foreign tax credits, use of available net operating losses and certain other limitations. The Corporation does not
anticipate the tax treatment of U.S. sourced dividends to the BHC to impact BHC liquidity or future capital actions.
115
OVERVIEW
Table 1 provides selected financial data and performance indicators for the quarters ended March 31, 2024 and 2023.
116
Table 1 - Financial highlights
Financial Condition Highlights
Ending Balances at
Average for the quarter ended
(In thousands)
March 31,
2024
2023
Variance
March 31,
2024
March 31,
2023
Variance
Money market investments
$
5,928,578
$
6,998,871
$
(1,070,293)
$
6,483,615
$
5,736,352
$
747,263
Investment securities
26,324,139
25,148,673
1,175,466
27,698,252
28,076,090
(377,838)
Loans
35,124,090
35,069,272
54,818
35,059,391
32,048,055
3,011,336
Earning assets
67,376,807
67,216,816
159,991
69,241,258
65,860,497
3,380,761
Total assets
70,936,939
70,758,155
178,784
72,294,855
68,843,309
3,451,546
Deposits
63,808,784
63,618,243
190,541
64,032,945
61,145,654
2,887,291
Borrowings
1,032,393
1,078,332
(45,939)
1,056,673
1,167,845
(111,172)
Total liabilities
65,759,625
65,611,202
148,423
66,096,115
63,202,001
2,894,114
Stockholders’ equity
5,177,314
5,146,953
30,361
6,198,740
5,641,308
557,432
Note: Average balances exclude unrealized gains or losses on debt securities available-for-sale.
Operating Highlights
Quarter ended March 31,
(In thousands, except per share information)
2024
2023
Net interest income
$
550,744
$
531,656
$
19,088
Provision for credit losses (benefit)
72,598
47,637
24,961
Non-interest income
163,818
161,961
1,857
Operating expenses
483,113
440,687
42,426
Income before income tax
158,851
205,293
(46,442)
Income tax expense
55,568
46,314
9,254
Net income
$
103,283
$
158,979
$
(55,696)
Net income applicable to common stock
$
102,930
$
158,626
$
(55,696)
Net income per common share - basic
$
1.43
$
2.22
$
(0.79)
Net income per common share - diluted
$
1.43
$
2.22
$
(0.79)
Dividends declared per common share
$
0.62
$
0.55
$
0.07
Quarter ended March 31,
Selected Statistical Information
2024
2023
Common Stock Data
$
88.09
$
57.41
71.32
61.82
Profitability Ratios
0.57
%
0.93
%
6.07
10.00
2.38
2.68
2.60
2.92
3.16
3.22
3.38
3.46
Capitalization Ratios
8.57
%
8.19
%
16.36
16.73
16.42
16.79
18.19
18.61
8.45
8.37
117
Non-GAAP Financial Measures
This Form 10-Q contains financial information prepared under accounting principles generally accepted in the United
States (“U.S. GAAP”) and non-GAAP financial measures. Management uses non-GAAP financial measures when it
has determined that these measures provide meaningful information about the underlying performance of the
Corporation’s ongoing operations. Non-GAAP financial measures used by the Corporation may not be comparable to
similarly named non-GAAP financial measures used by other companies.
Adjusted net income - Non-GAAP Financial Measure
In addition to analyzing the Corporation’s results on a reported basis, management monitors the “Adjusted net
income” of the Corporation and excludes the impact of certain transactions on the results of its operations.
Management believes that the “Adjusted net income” provides meaningful information about the underlying
performance of the Corporation’s ongoing operations. The “Adjusted net income” is a non-GAAP financial measure.
The following table presents the Adjusted net income for the quarter ended of March 31, 2024. There were no non-
GAAP adjustments for the quarter ended March 31, 2023.
Table 2 - Adjusted Net Income for the Quarter Ended March 31, 2024 (Non-GAAP)
(Unaudited)
(In thousands)
Income before
income tax
Income tax
expense
(benefit)
Total
U.S. GAAP Net income
$158,851
$55,568
$103,283
Non-GAAP Adjustments:
FDIC Special Assessment [1]
14,287
(5,234)
9,053
Adjustments related to intercompany distributions [1]
6,400
16,483
22,883
Adjusted net income (Non-GAAP)
$179,538
$44,319
$135,219
[1] Refer to the Overview section of Management’s Discussion and Analysis included in this Form 10-Q for a description of this item.
118
Net interest income on a taxable equivalent basis – Non-GAAP Financial Measure
Net interest income on a taxable equivalent basis is a non-GAAP financial measure. Management believes that this presentation
provides meaningful information since it facilitates the comparison of revenues arising from taxable and tax-exempt sources.
The Corporation’s interest earning assets include investment securities and loans that are exempt from income tax, principally in
Puerto Rico. The main sources of tax-exempt interest income are certain investments in obligations of the U.S. Government, its
agencies and sponsored entities, certain obligations of the Commonwealth of Puerto Rico and/or its agencies and municipalities,
and assets held by the Corporation’s international banking entities. To facilitate the comparison of interest related to these assets,
the interest has been converted to a taxable equivalent basis, using the applicable statutory income tax rates for each period.
According to the Puerto Rico tax law, a portion of interest cost, based on an equal proportion of tax-exempt assets to total assets,
and an allocation of general and administrative expenses should be attributed to exempt income, reducing the benefit of the tax
exempt income, and as such the disallowance of such deduction is considered in the taxable equivalent computation. The effective
yield, on a taxable equivalent basis, will vary depending on the level of these expenses that are attributed to the available exempt
income.
Net interest income on a taxable equivalent basis, with its different components, along with the reconciliation to net interest income
(GAAP), for the quarter ended March 31, 2024 as compared with the same period in 2023, segregated by major categories of
interest earning assets and interest-bearing liabilities are included in Table 3 of the Operating Results Analysis section below.
Tangible Common Equity and Tangible Assets
Tangible common equity, tangible common equity ratio, tangible assets and tangible book value per common share are non-GAAP
financial measures. Tangible common equity ratio and tangible book value per common share in conjunction with more traditional
bank capital ratios are commonly used by banks and analysts to compare the capital adequacy of banking organizations with
significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase accounting method for
mergers and acquisitions. Tangible common equity, tangible assets and other related measures should not be used in isolation or
as a substitute for stockholders' equity, total assets or any other measure calculated in accordance with GAAP. Moreover, the
manner in which the Corporation calculates its tangible common equity, tangible assets and other related measures may differ from
that of other companies reporting measures with similar names.
Table 9 provides a reconciliation of total stockholders’ equity to tangible common equity and total assets to tangible assets as of
March 31, 2024, and December 31, 2023.
Financial highlights for the quarter ended March 31, 2024
●
159.0 million for the same quarter of the previous year. Net interest margin for the first quarter of 2024 was 3.16%, a decrease
of 6 basis points when compared to 3.22% for the same quarter of the previous year. The decrease was mainly due to higher
deposit costs, principally from the Puerto Rico public sector and from online deposits in the U.S., which was partially offset by
higher yield from money market investments and loans. On a taxable equivalent basis, the net interest margin was 3.38%,
compared to 3.46% for the same quarter of the previous year.
●
$47.6 million for the same quarter of the previous year. The higher provision for credit losses was driven by higher reserves in
our commercial and consumer portfolios mostly due to higher loan volumes and changes in the credit ratings and the credit
quality of the US commercial portfolio and the BPPR consumer portfolio.
●
31, 2023, mainly due to higher service charges on deposit accounts and other service fees, partially offset by lower income
from mortgage banking activities resulting from the fair value adjustments of mortgage servicing rights.
●
operating expenses were driven mainly by the effect of the increase in loss estimate related to the FDIC Special Assessment,
119
higher personnel costs and higher technology and software expenses.
●
distributions from previous periods. Compared to the same quarter in the previous year, income tax expense was also higher
as the results of the first quarter of 2023 included the effect of the reversal of a valuation allowance of a tax credit expected to
be realized on the U. S. Operations.
●
driven by an increase in available-for-sale (“AFS”) investment securities, mainly due to purchases of U.S. Treasury Securities,
and loan growth, mainly in the mortgage portfolio and in auto loans, partially offset by a net decrease in cash and money
market investments due to the investments in the debt securities portfolio and loan originations.
●
Total deposits at March 31, 2024 increased by $190.5 million when compared to deposits at December 31, 2023, mainly due to
higher retail deposits, time deposits and deposits in trust in BPPR, partially offset by a decrease in Puerto Rico public sector
deposits.
●
for the quarter of $103.3 million and the amortization of unrealized losses from securities previously reclassified to held-to-
maturity (“HTM”) of $35.2 million, net of taxes, partially offset by the after-tax impact of the increase in net unrealized losses in
the portfolio of AFS securities of $71.1 million and common and preferred dividends declared during the quarter. As of March
31, 2024, the Corporation’s tangible book value per common share was $60.06, an increase of $0.32 from December 31, 2023
due mainly to the increase in stockholders’ equity during the period.
●
16.36%, the tier 1 leverage ratio was 8.45%, and the total capital ratio was 18.19%. Refer to Table 8 for capital ratios.
Refer to the Operating Results Analysis and Financial Condition Analysis within this MD&A for additional discussion of significant
quarterly variances and items impacting the financial performance of the Corporation.
As a financial services company, the Corporation’s earnings are significantly affected by general business and economic conditions
in the markets which we serve. Lending and deposit activities and fee income generation are influenced by the level of business
spending and investment, consumer income, spending and savings, capital market activities, competition, customer preferences,
interest rate conditions and prevailing market rates on competing products.
The Corporation operates in a highly regulated environment and may be adversely affected by changes in federal and local laws
and regulations. Also, competition with other financial institutions, as well as with non-traditional financial service providers and
technology companies that provide electronic and internet-based financial solutions and services, could adversely affect its
profitability.
The Corporation continuously monitors general business and economic conditions, industry-related indicators and trends,
competition, interest rate volatility, credit quality indicators, loan and deposit demand, operational and systems efficiencies, revenue
enhancements and changes in the regulation of financial services companies.
The description of the Corporation’s business contained in Item 1 of the 2023 Form 10-K, while not all inclusive, discusses additional
information about the business of the Corporation. Readers should also refer to “Part I - Item 1A” of the 2023 Form 10-K and “Part II
- Item 1A” of this Form 10-Q for a discussion of certain risks and uncertainties to which the Corporation is subject, many beyond the
Corporation’s control that, in addition to the other information in this Form 10-Q, readers should consider.
The Corporation’s common stock is traded on the NASDAQ Global Select Market under the symbol BPOP.
120
CRITICAL ACCOUNTING POLICIES / ESTIMATES
The accounting and reporting policies followed by the Corporation and its subsidiaries conform to generally accepted accounting
principles in the United States of America and general practices within the financial services industry. Various elements of the
Corporation’s accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other
subjective assessments. These estimates are made under facts and circumstances at a point in time and changes in those facts
and circumstances could produce actual results that differ from those estimates.
Management has discussed the development and selection of the critical accounting policies and estimates with the Corporation’s
Audit Committee. The Corporation has identified as critical accounting policies those related to: (i) Fair Value Measurement of
Financial Instruments; (ii) Loans and Allowance for Credit Losses; (iii) Loans Acquired with Deteriorated Credit Quality; (iv) Income
Taxes; (v) Goodwill and Other Intangible Assets; and (vi) Pension and Postretirement Benefit Obligations. For a summary of these
critical accounting policies and estimates, refer to that particular section in the MD&A included in the 2023 Form 10-K. Also, refer to
Note 2 to the Consolidated Financial Statements included in the 2023 Form 10-K for a summary of the Corporation’s significant
accounting policies and to Note 3 to the Consolidated Financial Statements included in this Form 10-Q for information on recently
adopted accounting standard updates.
OPERATING RESULTS ANALYSIS
NET INTEREST INCOME
Net interest income for the quarter ended March 31, 2024 was $550.7 million, compared to $531.7 million in the same quarter of
2023, an increase of $19.1 million. Net interest income on a taxable equivalent basis for the first quarter of 2024 was $589.6 million
compared to $570.4 million in the first quarter of 2023, an increase of $19.2 million.
Net interest margin for the quarter was 3.16% compared to 3.22% in the first quarter of 2023 or a decrease of six basis points. On a
taxable equivalent basis, net interest margin for the first quarter of 2024 was 3.38%, compared to 3.46% for the same quarter the
prior year. The main variances in net interest income on a taxable equivalent basis were:
●
higher interest income from money market, investments, and trading securities by $55.0 million mainly driven by higher
average yield by 60 basis points. The increase in yield was driven by a higher interest rate environment and reinvestment
of investment maturities in higher yielding U.S. Treasury bills;
●
higher interest income from loans by $100.2 million resulting from an increase in average loans by $3.0 billion reflecting
loan increases in both PB and BPPR and across most portfolios and higher yield on loans by 51 basis points when
compared to the same quarter of 2023 due to origination of loans in a higher interest rate environment and the repricing of
adjustable-rate loans. The portfolio with the highest variances included commercial loans with an increase of $54.0 million
in interest income, or 52 basis points, consumer loans with an increase of $15.8 million or 105 basis points, and auto
loans which increased $10.6 million or 63 basis points.
Partially offset by:
●
higher interest expense on deposits by $136.3 million driven by higher cost of deposits by 99 basis points driven by higher
average volume and higher cost of market linked P.R. public deposits by $2.7 billion and higher volume of U.S. online
deposits.
Net interest income for the BPPR segment amounted to $472.8 million for the first quarter of 2024, compared to $449.8 million in the
first quarter of 2023. Net interest margin increased to 3.33% compared to 3.24% in the first quarter of 2023. The increase in net
interest income of $23.0 million was driven by higher yield and volume on earning assets partially offset by the increase in the cost
of deposits, mainly from the P.R. public sector. The cost of interest-bearing deposits increased 83 basis points to 2.44% from 1.61%
in the same quarter of 2023. Total deposit costs for the quarter increased by 63 basis points, from 1.18% in the first quarter of 2023
to 1.81%.
Net interest income for PB was $84.9 million for the quarter ended March 31, 2024, compared to $90.1 million during the first
quarter of 2023, a decrease of $5.2 million. Net interest margin decreased 75 basis points to 2.59% when compared to 3.34%
121
during the first quarter of 2023. The decrease in net interest margin was mostly driven by a higher cost of deposits in all categories,
partially offset by the increase in loan volume and the repricing of adjustable-rate loans driven by the changes in interest rates. The
cost of interest-bearing deposits was 3.86% compared to 2.47% in the first quarter of 2023, or an increase of 139 basis points, while
total deposit cost was 3.40% compared to 2.01% in the first quarter of 2023.
122
Table 3 - Analysis of Levels & Yields on a Taxable Equivalent Basis (Non-GAAP)
Quarter ended March 31,
Variance
Average Volume
Average Yields / Costs
Interest
Attributable to
2024
2023
Variance
2024
2023
2024
2023
Variance
Rate
Volume
(In millions)
(In thousands)
$
6,484
$
5,736
$
748
5.49
%
4.65
%
0.84
%
Money market investments
$
88,516
$
65,724
$
22,792
$
13,566
$
9,226
28,308
28,862
(554)
2.71
2.22
0.49
Investment securities [1]
191,103
158,914
32,189
35,317
(3,128)
33
31
2
3.75
4.47
(0.72)
Trading securities
311
338
(27)
(55)
28
Total money market,
investment and trading
34,825
34,629
196
3.23
2.63
0.60
securities
279,930
224,976
54,954
48,828
6,126
Loans:
17,613
15,761
1,852
6.84
6.32
0.52
Commercial
299,504
245,469
54,035
23,691
30,344
992
732
260
8.96
8.40
0.56
Construction
22,100
15,155
6,945
1,215
5,730
1,742
1,588
154
6.74
6.12
0.62
Leasing
29,353
24,282
5,071
2,595
2,476
7,723
7,388
335
5.62
5.46
0.16
Mortgage
108,543
100,773
7,770
3,113
4,657
3,227
3,020
207
13.90
12.85
1.05
Consumer
111,490
95,715
15,775
8,441
7,334
3,763
3,559
204
8.77
8.14
0.63
Auto
82,054
71,407
10,647
6,421
4,226
35,060
32,048
3,012
7.48
6.97
0.51
Total loans
653,044
552,801
100,243
45,476
54,767
$
69,885
$
66,677
$
3,208
5.36
%
4.72
%
0.64
%
Total earning assets
$
932,974
$
777,777
$
155,197
$
94,304
$
60,893
Interest bearing deposits:
$
25,703
$
23,313
$
2,390
3.63
%
2.52
%
1.11
%
NOW and money market [2]
$
232,129
$
144,970
$
87,159
$
70,094
$
17,065
14,700
15,029
(329)
0.93
0.47
0.46
Savings
34,171
17,443
16,728
16,240
488
8,547
7,099
1,448
2.97
1.76
1.21
Time deposits
63,196
30,802
32,394
21,831
10,563
48,950
45,441
3,509
2.71
1.72
0.99
Total interest bearing deposits
329,496
193,215
136,281
108,165
28,116
15,083
15,704
(621)
Non-interest bearing demand
deposits
64,033
61,145
2,888
2.07
1.28
0.78
Total deposits
329,496
193,215
136,281
108,165
28,116
84
247
(163)
5.70
4.74
0.96
Short-term borrowings
1,192
2,885
(1,693)
309
(2,002)
Other medium and
998
947
51
5.13
4.78
0.35
long-term debt
12,709
11,266
1,443
399
1,044
Total interest bearing
50,032
46,635
3,397
2.76
1.80
0.96
liabilities (excluding demand
deposits)
343,397
207,366
136,031
108,873
27,158
4,770
4,338
432
Other sources of funds
$
69,885
$
66,677
$
3,208
1.98
%
1.26
%
0.72
%
Total source of funds
343,397
207,366
136,031
108,873
27,158
Net interest margin/
3.38
%
3.46
%
(0.08)
%
income on a taxable
equivalent basis (Non-
GAAP)
589,577
570,411
19,166
$
(14,569)
$
33,735
2.60
%
2.92
%
(0.32)
%
38,833
38,755
78
Net interest margin/ income
3.16
%
3.22
%
(0.06)
%
non-taxable equivalent basis
(GAAP)
$
550,744
$
531,656
$
19,088
Note: The changes that are not due solely to volume or rate are allocated to volume and rate based on the proportion of the change in each category.
[1] Average balances exclude unrealized gains or losses on debt securities available-for-sale and the unrealized loss related to certain securities transferred from
available-for-sale to held-to-maturity.
[2] Includes interest bearing demand deposits corresponding to certain government entities in Puerto Rico.
123
Provision for Credit Losses - Loans Held-in-Portfolio and Unfunded Commitments
For the quarter ended March 31, 2024, the Corporation recorded a provision expense of $72.1 million for credit losses related to
loans held-in-portfolio and unfunded commitments. The provision for credit loss related to the loans-held-in-portfolio for the quarter
ended March 31, 2024 was $72.4 million, compared to a provision expense of $47.1 million for the quarter ended March 31, 2023.
The increase in provision expense was driven by the commercial and consumer portfolio, mainly personal loans and credit cards.
Higher loan volumes and changes in credit quality in these portfolios contributed to the higher provision expense. The reserve
release related to unfunded commitments for the first quarter of 2024 was $0.2 million, compared to a provision expense of $0.6
million for the same period of 2023.
For the quarter ended March 31, 2024, the Corporation recorded $61.0 million in provision expense for loans-held-in-portfolio in the
BPPR segment, compared to a provision expense of $45.2 million for the quarter ended March 31, 2023. The Popular U.S. segment
recorded a provision expense of $11.4 million for the quarter ended March 31, 2024, compared to a provision expense of $1.9
million for the same quarter in 2023.
At March 31, 2024, the total allowance for credit losses for loans held-in-portfolio amounted to $739.5 million, compared to $729.3
million as of December 31, 2023. The ratio of the allowance for credit losses to loans held-in-portfolio was 2.11% at March 31, 2024,
compared to 2.08% at December 31, 2023. As discussed in Note 8 to the Consolidated Financial Statements, the Corporation
applies probability weightings to the outcomes of simulations using Moody’s Analytics’ Baseline, S3 (pessimistic) and S1 (optimistic)
scenarios to estimate the ACL. The baseline scenario is assigned the highest probability, followed by the pessimistic scenario to
account for uncertainties in the macro-economic outlook and any downside risk. The weight assigned to the pessimistic scenario
decreased this quarter in response to the positive momentum in the economy as expectations for the Federal Reserve achieving a
soft landing have improved. Refer to Note 8 to the Consolidated Financial Statements, for additional information on the
Corporation’s methodology to estimate its ACL. Refer to the Credit Risk section of this MD&A for a detailed analysis of net charge-
offs, non-performing assets, the allowance for credit losses and selected loan losses statistics.
Provision for Credit Losses – Investment Securities
The Corporation’s provision for credit losses related to its investment securities held-to-maturity is related to the portfolio of
obligations from the Government of Puerto Rico, states and political subdivisions. At March 31, 2024, the total allowance for credit
losses for this portfolio amounted to $5.7 million, compared to $5.8 million as of December 31, 2023. Refer to Note 6
to
Consolidated Financial Statements
for additional information on the ACL for this portfolio.
During the quarter ended March 31. 2024, the Corporation recognized a provision of $0.5 million related to a single security within
the “Other” portfolio in its debt securities available-for-sale, that after evaluation was determined to be impaired and as a result was
fully reserved. Refer to Note 5 to Consolidated Financial Statements for additional information on the ACL for this portfolio.
Non-Interest Income
Non-interest income was $163.8 million for the first quarter of 2024, an increase of $1.9 million when compared with the same
quarter of the previous year. The increase in non-interest income was primarily driven by:
●
debit card fees as a result of higher interchange transactional volumes, and higher investment management and trust
fees;
●
commercial accounts;
partially offset by:
●
fair value adjustment of mortgage servicing rights (“MSR”) and lower mortgage servicing fees.
124
Operating Expenses
Operating expenses for the quarter ended March 31, 2024 increased by $42.4 million when compared with the same quarter of
2023. Excluding the $6.4 million of interest accrued related to prior period taxes and the $14.3 million impact of the FDIC Special
Assessment total expenses for the first quarter of 2024 were $462.4 million, compared to $440.7 million in the first quarter of 2023.
The other factors that contributed to the variance in operating expenses were:
●
revisions that occur after the first quarter, an increase in headcount throughout 2023, an increase in health insurance
costs by $2.0 million, higher annual incentive awards of performance and restricted shares related expenses by $3.4
million, higher commissions and incentive compensation by $3.8 million, and higher payroll taxes and other compensation
expenses by $3.2 million;
●
million, an increase of $3.5 million from network management services, and higher IT professional and consulting fees by
$3.1 million;
●
credit card business; and
●
insurance premiums;
partially offset by:
●
●
●
●
examination expenses.
125
Table 4 - Operating Expenses
Quarters ended March 31,
(In thousands)
2024
2023
Variance
Personnel costs:
Salaries
$
129,384
$
125,393
$
3,991
Commissions, incentives and other bonuses
38,611
31,162
7,449
Pension, postretirement and medical insurance
17,385
15,378
2,007
Other personnel costs, including payroll taxes
29,997
26,827
3,170
Total personnel costs
215,377
198,760
16,617
Net occupancy expenses
28,041
26,039
2,002
Equipment expenses
9,567
8,412
1,155
Other taxes
14,375
16,291
(1,916)
Professional fees
28,918
33,431
(4,513)
Technology and software expenses
79,462
68,559
10,903
Processing and transactional services:
Credit and debit cards
12,144
12,550
(406)
Other processing and transactional services
22,050
21,359
691
Total processing and transactional services
34,194
33,909
285
Communications
4,557
4,088
469
Business promotion:
Rewards and customer loyalty programs
14,056
12,348
1,708
Other business promotion
6,933
6,523
410
Total business promotion
20,989
18,871
2,118
FDIC deposit insurance
23,887
8,865
15,022
Other real estate owned (OREO) income
(5,321)
(1,694)
(3,627)
Other operating expenses:
Operational losses
3,561
6,800
(3,239)
All other
24,711
17,561
7,150
Total other operating expenses
28,272
24,361
3,911
Amortization of intangibles
795
795
-
Total operating expenses
$
483,113
$
440,687
$
42,426
Income Taxes
For the quarter ended March 31, 2024, the Corporation recorded an income tax expense of $55.6 million with an effective tax rate
(ETR) of 35%, compared to $46.3 million with an ETR of 23% for the same period of 2023. As discussed in Note 30, the income tax
expense for the quarter ended March 31, 2024 includes $23.0 million related to withholding tax liabilities for certain intercompany
distributions, out of which $16.5 million was related to distributions between years 2014-2023 and $6.5 million was related to a
distribution completed during the quarter ended March 31, 2024. This variance was partially offset due to lower pre-tax income for
the quarter ended March 31, 2024. Also, for the quarter ended March 31, 2023, the Corporation reported a reversal of a valuation
allowance on a tax credit expected to be realized in the U. S. operations. Based on the Adjusted Net Income, as defined in the Non-
GAAP Financial Measures section of this MD&A, the ETR for the quarter ended March 31, 2024, would have been 24.7%. Refer to
the Significant Events section in this MD&A for more details on Significant Events and Non-GAAP Financial Measures.
At March 31, 2024, the Corporation had a net deferred tax asset amounting to $1.0 billion, net of a valuation allowance of $0.5
billion. The net deferred tax asset related to the U.S. operations was $0.3 billion, net of a valuation allowance of $0.4 billion.
Refer to Note 30 to the Consolidated Financial Statements for a reconciliation of the statutory income tax rate to the effective tax
rate and additional information on the income tax expense and deferred tax asset balances.
126
REPORTABLE SEGMENT RESULTS
The Corporation’s reportable segments for managerial reporting purposes consist of Banco Popular de Puerto Rico and Popular
U.S. A Corporate group has also been defined to support the reportable segments.
For a description of the Corporation’s reportable segments, including additional financial information and the underlying
management accounting process, refer to Note 32 to the Consolidated Financial Statements.
The Corporate group reported a net loss of $25.4 million for the quarter ended March 31, 2024, compared with a net income of $1.3
million for the same quarter of the previous year. The negative variance was mainly attributed to the $22.9 million adjustment to
recognize the tax impact associated with prior period intercompany distributions and the additional $6.5 million recognized for the
tax impact related to intercompany distributions paid during the first quarter of 2024.
Highlights on the earnings results for the reportable segments are discussed below:
Banco Popular de Puerto Rico
The Banco Popular de Puerto Rico reportable segment’s net income amounted to $121.3 million for the quarter ended March 31,
2024, compared with net income of $132.9 million for the same quarter of the previous year. The factors that contributed to the
variance in the financial results included the following:
●
●
by the increase in interest rates by the Federal Reserve and higher average balances of U.S. Treasury
securities.
●
consumer loans, mainly from auto and consumer loans,
partially offset by
●
Rico government deposits, and the higher interest rate environment’s impact on the cost of NOW accounts,
time deposits, and savings deposits.
The net interest margin for the quarter ended March 31, 2024 was 3.33% compared to 3.28% for the same quarter in the
previous year. The increase in net interest margin is driven by the earnings assets mix and the higher yields from investment
securities and loans, particularly commercial and consumer loans, due to the increase in rates; partially offset by higher cost of
deposits.
●
March 31, 2023, or an unfavorable variance of $15.0 million mainly driven by changes in credit quality mostly due to
consumer portfolios and higher volumes;
●
●
million recorded during the quarter ended March 31,2023;
●
million in the fair value adjustment of mortgage service rights.
127
partially offset by
●
●
higher interchange transactional volumes and an increase of $1.1 million on trust fees; and
●
●
first quarter of 2024;
●
and increase in headcount;
●
amortization of software costs and higher IT consulting fees.
●
portfolio related to higher transactional volumes;
partially offset by
●
●
●
Popular U.S.
For the quarter ended March 31, 2024, the reportable segment of Popular U.S. reported a net income of $7.0 million, compared with
a net income of $25.0 million for the same quarter of the previous year. The factors that contributed to the variance in the financial
results included the following:
●
●
balance of time deposits gathered through online channels,
partially offset by
●
higher yields due to increase in rates; and
●
yields due to the increase in market rates.
The net interest margin for the quarter ended March 31, 2024 was 2.59% compared to 3.34% for the same quarter in the previous
year driven by the higher cost of deposits.
128
●
changes in internal credit risk ratings in the commercial loan portfolio;
●
●
●
group by $1.8 million mainly from higher personnel costs.
FINANCIAL CONDITION ANALYSIS
Assets
The Corporation’s total assets were $70.9 billion at March 31, 2024, compared to $70.8 billion at December 31, 2023. Refer to the
Consolidated Statements of Financial Condition included in this report for additional information.
Money market investments and debt securities available-for-sale
Money market investments decreased by $1.1 billion as of March 31, 2024, when compared to December 31, 2023, as these funds
were used in part for the purchase of debt securities and loan originations. Debt securities available-for-sale increased $1.3 billion,
mainly due to purchases of U.S. Treasury Securities, while debt securities held-to-maturity decreased by $111.1 million driven by
maturities of U.S. Treasury securities, partially offset by the amortization of $44.0 million of the discount related to U.S. Treasury
securities previously reclassified from the AFS to HTM. Refer to Note 5 and to Note 6 to the Consolidated Financial Statements for
additional information with respect to the Corporation’s debt securities available-for-sale and held-to-maturity.
129
Loans
Refer to Table 5 for a breakdown of the Corporation’s loan portfolio. Also, refer to Note 7 in the Consolidated Financial Statements
for detailed information about the Corporation’s loan portfolio composition and loan purchases and sales.
Loans held-in-portfolio increased by $53.8 million to $35.1 billion as of March 31, 2024, compared to loans held-in-portfolio as of
December 31, 2023. During the quarter ended March 31, 2024, the BPPR portfolio increased by $123.8 million, driven by the growth
in the mortgage and auto loans portfolio and the PB loan portfolio decreased by $70.1 million, due in part by commercial loans
payoffs, offset by growth in the construction loans portfolio.
The Corporation’s $5.1 billion non-owner occupied commercial real estate portfolio is comprised of $3.0 billion in Puerto Rico and
$2.1 billion in the U.S. and is well diversified across a number of tenants in different industries and segments with exposure to retail
(35% of non-owner occupied CRE), hotels (19%) and office space (12%) accounting for two thirds of the total exposure. The
approximate $633 million office space exposure represents only 1.8% of the total loan portfolio and is comprised mainly of mid-rise
properties with diversified tenants with average loan size of $2 million across both the U.S. and Puerto Rico.
Popular’s $2.4 billion commercial multi-family portfolio represents approximately 7% of total loans and is concentrated in New York
Metro ($1.4 billion), South Florida ($734 million) and Puerto Rico ($197 million). In the New York Metro region, the Corporation has
no exposure to rent controlled buildings. The majority of our multi-family loans in that region are collateralized by underlying
buildings that count on a mix of units subject to rent stabilized (subject to annual capped rent increases) and market-rate units. The
rent stabilized units represent less than 40% of the total units in the loan portfolio with the majority originated after 2019. The mix of
units within a building is common across the New York Metro region due to tax incentives awarded to developers based on rent
stabilized units. In 2024, there are approximately $198 million in multi-family loans in our New York Metro portfolio expected to
reprice.
130
Table 5 - Loans Ending Balances
(In thousands)
March 31, 2024
December 31, 2023
Variance
Loans held-in-portfolio:
Commercial
$
2,384,635
$
2,415,620
(30,985)
5,057,059
5,087,421
(30,362)
3,117,844
3,080,635
37,209
7,025,483
7,126,121
(100,638)
Total Commercial
17,585,021
17,709,797
(124,776)
Construction
1,009,303
959,280
50,023
Leasing
1,765,413
1,731,809
33,604
Mortgage
7,783,662
7,695,917
87,745
Consumer
1,142,153
1,135,747
6,406
66,717
65,953
764
1,897,010
1,945,247
(48,237)
3,706,854
3,660,780
46,074
162,605
160,441
2,164
Total Consumer
6,975,339
6,968,168
7,171
Total loans held-in -portfolio
$
35,118,738
$
35,064,971
53,767
Loans held-for-sale:
$
5,352
$
4,301
1,051
Total loans held-for-sale
$
5,352
$
4,301
1,051
Total loans
$
35,124,090
$
35,069,272
54,818
131
Other assets
Other assets amounted to $2.1 billion at March 31, 2024, compared to $2.0 billion at December 31, 2023. Refer to Note 12 to the
Consolidated Financial Statements for a breakdown of the principal categories that comprise the caption of “Other Assets” in the
Consolidated Statements of Financial Condition at March 31, 2024 and December 31, 2023.
Liabilities
The Corporation’s total liabilities were $65.8 billion at March 31, 2024, an increase of $148.4 million, when compared to December
31, 2023, mainly due to an increase in deposits as discussed below.
Deposits and Borrowings
The composition of the Corporation’s financing to total assets at March 31, 2024 and December 31, 2023 is included in Table 6.
Table 6 - Financing to Total Assets
March 31,
December 31,
% increase (decrease)
% of total assets
(In millions)
2024
2023
from 2023 to 2024
2024
2023
Non-interest bearing deposits
$
15,492
$
15,420
0.5
%
21.8
%
21.8
%
Interest-bearing core deposits
43,463
43,571
(0.3)
61.3
61.6
Other interest-bearing deposits
4,854
4,627
4.9
6.8
6.5
Repurchase agreements
66
91
(27.5)
0.1
0.1
Notes payable
966
987
(2.1)
1.4
1.4
Other liabilities
919
915
0.4
1.3
1.3
Stockholders’ equity
5,177
5,147
0.6
7.3
7.3
Total Deposits
The Corporation’s deposits totaled $63.8 billion as of March 31, 2024, compared to $63.6 billion as of December 31, 2023. The
increase in the retail demand deposits, time deposits and deposits in trust in BPPR, offset in part by the decrease in P.R. public
sector accounts were the main drivers of the $190.5 million increase during the period.
P.R. Public Sector Deposits
As of March 31, 2024, the Puerto Rico public sector deposits amounted to $18.0 billion, compared to $18.1 billion as of December
31, 2023.
Approximately 28% of the Corporation’s deposits as of March 31, 2024 are public fund deposits from the Government of Puerto
Rico, municipalities and government instrumentalities and corporations. P.R public sector deposit costs are indexed to changes in
short-term market rates with a one-quarter lag, in accordance with contractual terms. As a result, these costs may lag in variable
asset repricing. These deposits require that the bank pledge high credit quality securities as collateral; therefore, liquidity risks
arising from public sector deposit outflows are lower. Refer to the Liquidity section in this MD&A for additional information on the
Corporation’s funding sources. Fluctuations of public sector deposit balances are uncertain and difficult to predict. Factors that could
impact public sector deposit balances at any given period, include, but are not limited to the receipt of funds by the Puerto Rico
Government of from federal disaster funding assistance (i.e. hurricane or pandemic related funds) and other events such as
seasonal tax collections which may result in increases of public sector deposit balances at BPPR in the near term. The amount and
timing of reductions in public sector deposit balances, depend on government actions such as, the speed at which federal
assistance is distributed, the financial condition, liquidity and cash management practices of the Puerto Rico Government and its
instrumentalities, and/or the implementation of fiscal and debt adjustment plans approved pursuant to PROMESA or other actions
mandated by the Fiscal Oversight and Management Board for Puerto Rico (the “Oversight Board”).
Refer to Table 7 for a breakdown of the Corporation’s deposits at March 31, 2024 and December 31, 2023.
132
Table 7 - Deposits Ending Balances
(In thousands)
March 31, 2024
December 31, 2023
Variance
Demand deposits
$
26,473,367
$
27,579,054
$
(1,105,687)
Savings, NOW and money market deposits (non-brokered)
27,852,551
26,817,844
1,034,707
Savings, NOW and money market deposits (brokered)
727,794
719,453
8,341
Time deposits (non-brokered)
7,850,459
7,546,138
304,321
Time deposits (brokered CDs)
904,613
955,754
(51,141)
Total deposits
$
63,808,784
$
63,618,243
$
190,541
[1] Includes interest and non-interest bearing demand deposits.
Borrowings
The Corporation’s borrowings totaled $1.0 billion at March 31, 2024 compared to $1.1 billion at December 31, 2023. Refer to Note
15 to the Consolidated Financial Statements for detailed information on the Corporation’s borrowings. Also, refer to the Liquidity
section in this MD&A for additional information on the Corporation’s funding sources.
Stockholders’ Equity
Stockholders’ equity totaled $5.2 billion at March 31, 2024, an increase of $30.4 million when compared to December 31, 2023,
principally due to net income for the quarter ended March 31, 2024 of $103.3 million and the amortization of unrealized losses from
securities previously reclassified to HTM of $35.2 million, net of taxes, partially offset by the after-tax impact of the increase in net
unrealized losses in the portfolio of AFS securities of $71.1 million and common and preferred dividends declared during the
quarter. Refer to the Consolidated Statements of Financial Condition, Comprehensive Income and of Changes in Stockholders’
Equity for information on the composition of stockholders’ equity.
133
REGULATORY CAPITAL
The Corporation, BPPR and PB are subject to regulatory capital requirements established by the Federal Reserve Board. The risk-
based capital standards applicable to the Corporation, BPPR and PB (“Basel III capital rules”) are based on the final capital
framework for strengthening international capital standards, known as Basel III, of the Basel Committee on Banking Supervision. As
of March 31, 2024, the Corporation’s, BPPR’s and PB’s capital ratios continue to exceed the minimum requirements for being “well-
capitalized” under the Basel III capital rules.
The risk-based capital ratios presented in Table 8, which include common equity tier 1, Tier 1 capital, total capital and leverage
capital as of March 31, 2024 and December 31, 2023.
Table 8 - Capital Adequacy Data
(Dollars in thousands)
March 31, 2024
December 31, 2023
Common equity tier 1 capital:
Common stockholders equity - GAAP basis
$
5,155,171
$
5,124,810
CECL transitional amount
42,376
84,751
AOCI related adjustments due to opt-out election
1,864,638
1,831,003
Goodwill, net of associated deferred tax liability (DTL)
(664,799)
(666,538)
Intangible assets, net of associated DTLs
(8,969)
(9,764)
Deferred tax assets and other deductions
(306,179)
(310,947)
Common equity tier 1 capital
$
6,082,238
$
6,053,315
Additional tier 1 capital:
Preferred stock
22,143
22,143
Additional tier 1 capital
$
22,143
$
22,143
Tier 1 capital
$
6,104,381
$
6,075,458
Tier 2 capital:
Trust preferred securities subject to phase in as tier 2
192,674
192,674
Other inclusions (deductions), net
467,158
465,833
Tier 2 capital
$
659,832
$
658,507
Total risk-based capital
$
6,764,213
$
6,733,965
Minimum total capital requirement to be well capitalized
$
3,717,730
$
3,714,633
Excess total capital over minimum well capitalized
$
3,046,483
$
3,019,332
Total risk-weighted assets
$
37,177,300
$
37,146,330
Total assets for leverage ratio
$
72,264,347
$
71,353,184
Risk-based capital ratios:
Common equity tier 1 capital
16.36
%
16.30
%
Tier 1 capital
16.42
16.36
Total capital
18.19
18.13
Tier 1 leverage
8.45
8.51
[1] The CECL transitional amount includes the impact of Popular's adoption of the new CECL accounting standard on January 1, 2020.
134
The Basel III capital rules provide that a depository institution is deemed to be well capitalized if it maintains a leverage ratio of at
least 5%, a common equity Tier 1 ratio of at least 6.5%, a Tier 1 capital ratio of at least 8% and a total risk-based ratio of at least
10%. The Corporation, BPPR and PB leverage ratio, common equity Tier 1 ratio and Tier 1 capital ratio, respectively as of March
31, 2024, continue to exceed the minimum requirements for being “well-capitalized” under the Basel III capital rules.
Pursuant to the adoption of the CECL accounting standard on January 1, 2020, the Corporation elected to use the five-year
transition period option as provided in the final interim regulatory capital rules effective March 31, 2020. The five-year transition
period provision delayed for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period
to phase out the aggregate amount of the capital benefit provided during the initial two-year delay. As of March 31, 2024, the
Corporation had phased-in 75% of the cumulative CECL deferral with the remaining impact to be recognized over the remainder of
the three-year transition period.
The increase in the common equity Tier I capital ratio, Tier I capital ratio, and total capital ratio as of March 31, 2024 as compared to
December 31, 2023 was mainly due to the three months period earnings. The decrease in leverage capital ratio was mainly due to
higher average assets which are impacted by zero-risk weighted assets that do not have a significant impact on the risk-weighted
assets, partially offset by the period earnings.
Reconciliation to Tangible Common Equity and Tangible Assets
Table 9 provides a reconciliation of total stockholders’ equity to tangible common equity and total assets to tangible assets as of
March 31, 2024, and December 31, 2023.
135
Table 9 - Reconciliation of Tangible Common Equity and Tangible Assets
(In thousands, except share or per share information)
March 31, 2024
December 31, 2023
Total stockholders’ equity
$
5,177,314
$
5,146,953
Less: Preferred stock
(22,143)
(22,143)
Less: Goodwill
(804,428)
(804,428)
Less: Other intangibles
(8,969)
(9,764)
Total tangible common equity
$
4,341,774
$
4,310,618
Total assets
$
70,936,939
$
70,758,155
Less: Goodwill
(804,428)
(804,428)
Less: Other intangibles
(8,969)
(9,764)
Total tangible assets
$
70,123,542
$
69,943,963
Tangible common equity to tangible assets
6.19
%
6.16
%
Common shares outstanding at end of period
72,284,875
72,153,621
Tangible book value per common share
$
60.06
$
59.74
Quarterly average
Total stockholders’ equity [1]
$
6,198,740
$
6,072,871
Average unrealized (gains) losses on AFS securities transferred to HTM
639,226
683,077
Adjusted total stockholder's equity
6,837,966
6,755,948
Less: Preferred Stock
(22,143)
(22,143)
Less: Goodwill
(804,427)
(804,427)
Less: Other intangibles
(9,490)
(10,286)
Total tangible common equity
$
6,001,906
$
5,919,092
Return on average tangible common equity
6.90
%
6.32
%
transferred from available-for-sale to held-to-maturity.
136
RISK MANAGEMENT
Market / Interest Rate Risk
The financial results and capital levels of the Corporation are constantly exposed to market, interest rate and liquidity risks.
Market risk refers to the risk of a reduction in the Corporation’s capital due to changes in the market valuation of its assets and/or
liabilities.
Most of the assets subject to market valuation risk are debt securities classified as available-for-sale. Refer to Notes 5 and 6 to the
Consolidated Financial Statements for further information on the debt securities available-for-sale and held-to-maturity portfolios.
Debt securities classified as available-for-sale amounted to $18.0 billion as of March 31, 2024. Other assets subject to market risk
include loans held-for-sale, which amounted to $5 million, mortgage servicing rights (“MSRs”) which amounted to $115 million, and
securities classified as “trading”, which amounted to $27 million, as of March 31, 2024.
Interest Rate Risk (“IRR”)
The Corporation’s net interest income is subject to various categories of interest rate risk, including repricing, basis, yield curve and
option risks. In managing interest rate risk, management may alter the mix of floating and fixed rate assets and liabilities, change
pricing schedules, adjust maturities through sales and purchases of investment securities, and enter into derivative contracts,
among other alternatives.
Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by
investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics
of assets and liabilities and determining the appropriate rate risk position given line of business forecasts, management objectives,
market expectations and policy constraints.
Management utilizes various tools to assess IRR, including Net Interest Income (“NII”) simulation modeling, static gap analysis, and
Economic Value of Equity (“EVE”). The three methodologies complement each other and are used jointly in the evaluation of the
Corporation’s IRR. NII simulation modeling is prepared for a five-year period, which in conjunction with the EVE analysis, provides
management a better view of long-term IRR.
Net interest income simulation analysis performed by legal entity and on a consolidated basis is a tool used by the Corporation in
estimating the potential change in net interest income resulting from hypothetical changes in interest rates. Sensitivity analysis is
calculated using a simulation model which incorporates actual balance sheet figures detailed by maturity and interest yields or costs.
Management assesses interest rate risk by comparing various NII simulations under different interest rate scenarios that differ in
direction of interest rate changes, the degree of change and the projected shape of the yield curve. For example, the types of rate
scenarios processed during the quarter include flat rates, implied forwards, and parallel and non-parallel rate shocks. Management
also performs analyses to isolate and measure basis and prepayment risk exposures.
The asset and liability management group performs validation procedures on various assumptions used as part of the simulation
analyses as well as validations of results on a monthly basis. In addition, the model and processes used to assess IRR are subject
to independent validations according to the guidelines established in the Model Governance and Validation policy.
The Corporation processes NII simulations under interest rate scenarios in which the yield curve is assumed to rise and decline by
the same magnitude (parallel shifts). The rate scenarios considered in these market risk simulations include instantaneous parallel
changes of -100, -200, +100, and +200 basis points during the succeeding twelve-month period. Simulation analyses are based on
many assumptions, including that the balance sheet remains flat, the relative levels of market interest rates across all yield curve
points and indexes, interest rate spreads, loan prepayments and deposit elasticity. Thus, they should not be relied upon as
indicative of actual results. Further, the estimates do not contemplate actions that management could take to respond to changes in
interest rates. Additionally, the Corporation is also subject to basis risk in the repricing of its assets and liabilities, including the basis
related to using different rate indexes for the repricing of assets and liabilities, as well as the effect of pricing lags which may be
contractual or due to historical differences in the timing of management responses to changes in the rate environment. By their
nature, these forward-looking computations are only estimates and may be different from what may actually occur in the future. The
following table presents the results of the simulations at March 31, 2024 and December 31, 2023, assuming a static balance sheet
and parallel changes over flat spot rates over a one-year time horizon:
137
Table 10 - Net Interest Income Sensitivity (One Year Projection)
March 31, 2024
December 31, 2023
(Dollars in thousands)
Amount Change
Percent Change
Amount Change
Percent Change
Change in interest rate
+200 basis points
41,091
1.81
20,822
0.92
+100 basis points
22,529
0.99
11,496
0.51
-100 basis points
7,789
0.34
19,589
0.87
-200 basis points
(6,355)
(0.28)
16,971
0.75
As of March 31, 2024, NII simulations show the Corporation maintains a neutral to slightly asset sensitive position that marginally
increased as compared to the results as of December 31, 2023. The primary reasons for the variation in sensitivity are changes in
balance sheet composition driven by an increase in short-term U.S Treasury Bills (“T- Bills”) partly offset by a reduction in overnight
Fed Funds and U.S Treasury Notes (“T- Notes”) on the asset side, combined with a decrease in Puerto Rico public sector deposits
which are indexed to market rates and slightly higher non-interest bearing deposits. These results suggest that changes in the
Corporation’s net interest income sensitivity are driven by changes in the composition of the investment portfolio as the term bond
portfolio continues to run off and get reinvested, together with excess reserves, in short-term investments such as T-Bills.
Additionally, variations in liability cost, primarily driven by Puerto Rico public sector deposits that represented $18.0 billion or 28% of
deposits as of March 31, 2024, as well as changes in the composition and mix of deposits, also impact the sensitivity profile. In the
more extreme declining rate scenarios net interest income would be affected as the repricing of short-term assets and variable rate
loans slightly exceeds the benefit in cost reduction of these deposits. In rising rate scenarios, Popular’s net interest income is also
impacted by its large proportion of Puerto Rico public sector deposit, however the repricing of assets as they either reset or mature
lead to an increase in net interest income.
The Corporation’s loan and investment portfolios are subject to prepayment risk, which results from the ability of a third-party to
repay debt obligations prior to maturity. Prepayment risk also could have a significant impact on the duration of mortgage-backed
securities and collateralized mortgage obligations since prepayments could shorten (or lower prepayments could extend) the
weighted average life of these portfolios.
Trading
The Corporation engages in trading activities in the ordinary course of business at its subsidiaries, BPPR and Popular Securities.
Popular Securities’ trading activities consist primarily of market-making activities to meet expected customers’ needs related to its
retail brokerage business, and purchases and sales of U.S. Government and government sponsored securities with the objective of
realizing gains from expected short-term price movements. BPPR’s trading activities consist primarily of holding U.S. Government
sponsored mortgage-backed securities classified as “trading” and hedging the related market risk with “TBA” (to-be-announced)
market transactions. The objective is to derive spread income from the portfolio and not to benefit from short-term market
movements. In addition, BPPR uses forward contracts or TBAs to hedge its securitization pipeline. Risks related to variations in
interest rates and market volatility are hedged with TBAs that have characteristics similar to that of the forecasted security and its
conversion timeline.
At March 31, 2024, the Corporation held trading securities with a fair value of $27 million, representing approximately 0.04% of the
Corporation’s total assets, compared with $32 million and 0.05%, respectively, at December 31, 2023. As shown in Table 11, the
trading portfolio consists principally of mortgage-backed securities and U.S. Treasuries, which at March 31, 2024 were investment
grade securities.
138
Table 11 - Trading Portfolio
March 31, 2024
December 31, 2023
(Dollars in thousands)
Amount
Weighted
Average Yield
[1]
Amount
Weighted
Average Yield
[1]
Mortgage-backed securities
$
18,671
5.69
%
$
14,373
5.69
%
U.S. Treasury securities
8,316
4.05
16,859
4.29
Collateralized mortgage obligations
90
5.12
98
5.21
Puerto Rico government obligations
60
0.60
71
0.91
Interest-only strips
166
12.00
167
12.00
Other (includes related trading derivatives)
5
6.10
-
-
Total
$
27,308
5.22
%
$
31,568
4.96
%
[1] Not on a taxable equivalent basis.
The Corporation’s trading activities are limited by internal policies. For each of the two subsidiaries, the market risk assumed under
trading activities is measured by the 5-day net value-at-risk (“VAR”), with a confidence level of 99%. The VAR measures the
maximum estimated loss that may occur over a 5-day holding period, given a 99% probability.
The Corporation’s trading portfolio had a 5-day VAR of approximately $0.4 million for the last week in March 2024. VAR models
include assumptions and estimates thus actual results could differ from the outputs from these models and assumptions. Back-
testing is performed on model results to compare actual results against maximum estimated losses, in order to evaluate model and
assumptions accuracy.
In the opinion of management, the size and composition of the trading portfolio does not represent a significant source of market risk
for the Corporation.
Liquidity
The objective of effective liquidity management is to ensure that the Corporation has sufficient liquidity to meet all of its financial
obligations, finance expected future growth, fund planned capital distributions and maintain a reasonable safety margin for cash
needs under both normal and stressed market conditions. The Board of Directors is responsible for establishing the Corporation’s
tolerance for liquidity risk, including approving relevant risk limits and policies. The Board of Directors has delegated the monitoring
of these risks to the Board’s Risk Management Committee and the Asset/Liability Management Committee. The management of
liquidity risk, on a long-term and day-to-day basis, is the responsibility of the Corporate Treasury Division. The Corporation’s
Corporate Treasurer is responsible for implementing the policies and procedures approved by the Board of Directors and for
monitoring the Corporation’s liquidity position on an ongoing basis. Also, the Corporate Treasury Division coordinates corporate
wide liquidity management strategies and activities with the reportable segments, oversees policy breaches and manages the
escalation process. The Financial and Operational Risk Management Division is responsible for the independent monitoring and
reporting of adherence with established policies.
An institution’s liquidity may be pressured if, for example, it experiences a sudden and unexpected substantial cash outflow due
deposit outflows, whether due to a loss of confidence by depositors, or other reasons, including exogenous events such as the
COVID-19 pandemic, a downgrading of its credit rating, or some other event that causes counterparties to avoid exposure to the
institution. Factors that the Corporation does not control, such as the economic outlook, adverse ratings of its principal markets,
perceptions of the financial services industry and regulatory changes, could also affect its ability to obtain funding.
The Corporation has adopted policies and limits to monitor the Corporation’s liquidity position and that of its banking subsidiaries.
Additionally, contingency funding plans are used to model various stress events of different magnitudes and affecting different time
horizons that assist management in evaluating the size of the liquidity buffers needed if those stress events occur. However, such
models may not predict accurately how the market and customers might react to every event, and are dependent on many
assumptions.
139
Deposits, including customer deposits, brokered deposits and public funds deposits, continue to be the most significant source of
funds for the Corporation, funding 90% of the Corporation’s total assets at March 31, 2024 and December 31, 2023. The ratio of
total ending loans to deposits was 55% at March 31, 2024 and December 31, 2023. In addition to traditional deposits, the
Corporation maintains borrowing arrangements, which amounted to approximately $1.0 billion in outstanding balances at March 31,
2024 (December 31, 2023 - $1.1 billion). A detailed description of the Corporation’s borrowings, including their terms, is included in
Note 15 to the Consolidated Financial Statements. Also, the Consolidated Statements of Cash Flows in the accompanying
Consolidated Financial Statements provide information on the Corporation’s cash inflows and outflows.
The following sections provide further information on the Corporation’s major funding activities and needs, as well as the risks
involved in these activities.
Banking Subsidiaries
Primary sources of funding for the Corporation’s banking subsidiaries (BPPR and PB or, collectively, “the banking subsidiaries”)
include retail, commercial and public sector deposits, brokered deposits, unpledged investment securities, mortgage loan
securitization and, to a lesser extent, loan sales.
Refer to Table 7 in this MD&A section for a breakdown of deposits by major types. Core deposits are generated from a large base of
consumer, corporate and public sector customers. Core deposits include certificates of deposit under $250,000, all interest-bearing
transactional deposit accounts, non-interest bearing deposits, and savings deposits. Core deposits exclude brokered deposits and
certificates of deposit over $250,000. Core deposits, excluding P.R. public funds that are fully collateralized, have historically
provided the Corporation with a sizable source of relatively stable and low-cost funds. P.R. public funds, while linked to market
interest rates, provide a stable source of funding with an attractive earnings spread. Core deposits totaled $59.0 billion, or 92% of
total deposits, at March 31, 2024, compared with $59.0 billion, or 93% of total deposits, at December 31, 2023. Core deposits
financed 88% of the Corporation’s earning assets at March 31, 2024 and December 31, 2023.
In addition, the Corporation maintains borrowing facilities with the FHLB and at the discount window of the Federal Reserve Bank of
New York (the “FRB”) and has a considerable amount of collateral pledged that can be used to raise funds under these facilities.
During the first quarter of 2024 the Corporation had no material incremental use of its available liquidity sources. At March 31,2024,
the Corporation’s available liquidity increased to $20.4 billion from $19.5 billion on December 31, 2023. The liquidity sources of the
Corporation at March 31, 2024 are presented in Table 12 below:
Table 12 - Liquidity Sources
March 31, 2024
December 31, 2023
(In thousands)
BPPR
Popular U.S.
Total
BPPR
Popular U.S.
Total
Unpledged securities and unused funding
sources:
Money market (excess funds at the
Federal Reserve Bank)
$
4,473,620
$
1,447,189
$
5,920,809
$
5,516,636
$
1,475,143
$
6,991,779
Unpledged securities
5,749,794
375,470
6,125,264
4,212,480
347,791
4,560,271
FHLB borrowing capacity
2,400,630
1,358,639
3,759,269
2,157,685
1,341,329
3,499,014
Discount window of the Federal Reserve
Bank borrowing capacity
2,674,719
1,917,123
4,591,842
2,605,674
1,818,946
4,424,620
Total available liquidity
$
15,298,763
$
5,098,421
$
20,397,184
$
14,492,475
$
4,983,209
$
19,475,684
Refer to Note 15 to the Consolidated Financial Statements for additional information of the Corporation’s borrowing facilities
available through its banking subsidiaries.
The principal uses of funds for the banking subsidiaries include loan originations, investment portfolio purchases, loan purchases
and repurchases, repayment of outstanding obligations (including deposits), advances on certain serviced portfolios and operational
expenses. Also, the banking subsidiaries assume liquidity risk related to collateral posting requirements for certain activities mainly
in connection with contractual commitments, recourse provisions, servicing advances, derivatives and credit card licensing
agreements.
140
The banking subsidiaries maintain sufficient funding capacity to address large increases in funding requirements such as deposit
outflows. The Corporation has established liquidity guidelines that require the banking subsidiaries to have sufficient liquidity to
cover all short-term borrowings and a portion of deposits.
The Corporation’s ability to compete successfully in the marketplace for deposits, excluding brokered deposits, depends on various
factors, including pricing, service, convenience and financial stability as reflected by operating results and financial condition, credit
ratings (by nationally recognized credit rating agencies), customer confidence, and importantly, FDIC deposit insurance coverage.
Deposits at all of the Corporation’s banking subsidiaries are federally insured (subject to FDIC limits) and this is expected to mitigate
the potential effect of the aforementioned risks.
The distribution by maturity of certificates of deposit with denominations of $250,000 and over at March 31, 2024 is presented in the
table that follows:
Table 13 - Distribution by Maturity of Certificates of Deposit of $250,000 and Over
(In thousands)
3 months or less
$
2,137,053
Over 3 to 12 months
766,629
Over 1 year to 3 years
245,638
Over 3 years
184,847
Total
$
3,334,167
The Corporation had $1.6 billion in brokered deposits at March 31, 2024, which financed approximately 2% of its total assets
(December 31, 2023 - $1.7 billion and 2%, respectively). In the event that any of the Corporation’s banking subsidiaries’ regulatory
capital ratios fall below those required by a well-capitalized institution or are subject to capital restrictions by the regulators, the
Corporation would be at risk that such banking subsidiary would not be able to raise or maintain brokered deposits and could also
face limitations on the rate paid on deposits, which may hinder the Corporation’s ability to effectively compete in its retail markets
and could affect its deposit raising efforts.
Deposits from the public sector represent an important source of funds for the Corporation. As of March 31, 2024, total Puerto Rico
public sector deposits were $18.0 billion, compared to $18.1 billion at December 31, 2023. These deposits require that the bank
pledges high credit quality securities as collateral; therefore, liquidity risks arising from public sector deposit outflows are lower given
that the bank receives its collateral in return. This, now unpledged, collateral can either be financed via repurchase agreements or
sold for cash. However, timing differences between the time the deposit outflow and when the bank receives its collateral may
occur. Additionally, the Corporation uses fixed-rate U.S. Treasury debt securities as collateral that have limited credit risk, but are
nonetheless subject to market value risk based on changes in the interest rate environment. When interest rates increase, the value
of this collateral decreases and could result in the Corporation having to provide additional collateral to cover the same amount of
deposit liabilities. This additional collateral could reduce unpledged securities otherwise available as liquidity sources to the
Corporation.
As of March 31, 2024, management believes that the banking subsidiaries had sufficient current and projected liquidity sources to
meet their anticipated cash flow obligations, as well as special needs and off-balance sheet commitments, in the ordinary course of
business. Management also believes that as of March 31, 2024 its banking subsidiaries have sufficient liquidity current and
projected resources to address a stress event. Although the banking subsidiaries have historically been able to replace maturing
deposits and advances, no assurance can be given that they would be able to replace those funds in the future if the Corporation’s
financial condition or general market conditions were to deteriorate. The Corporation’s financial flexibility will be severely constrained
if the banking subsidiaries are unable to maintain access to funding or if adequate financing is not available to accommodate future
financing needs at acceptable interest rates. The Corporation’s banking subsidiaries have to meet margin requirements on
repurchase agreements and other collateralized borrowing facilities that include certain required levels of cash deposits and
qualifying securities. To the extent that the value of securities previously pledged as collateral declines below such required
amounts because of market changes, the Corporation is required to deposit additional cash or securities to meet its margin
requirements, thereby adversely affecting its liquidity. Finally, to the extent the Corporation relies more heavily on more expensive
funding sources in order to meet its future growth, revenues may not increase in a manner that is proportionate to cover these costs.
In this case, the Corporation’s profitability would be adversely effected.
141
The Corporation monitors uninsured deposits under applicable FDIC regulations. Additionally, the Corporation monitors accounts
with balances over $250,000. While the Corporation has a diverse deposit base from retail, commercial, corporate and government
clients, as well as wholesale funding sources such as brokered deposits, it considers balance in excess of $250,000 to have a
higher potential liquidity risk. Table 14 reflects the aggregate balance in deposit accounts in excess of $250,000, including
collateralized public funds and deposits outside of the U.S. and its territories. Collateralized public funds, as presented in Table 14,
represent public deposit balances from governmental entities in the U.S. and its territories, including Puerto Rico and the United
States Virgin Islands, collateralized based on such jurisdictions’ applicable collateral requirements.
On March 31, 2024, deposits with balances in excess of $250,000, excluding foreign deposits (mainly deposits in the British Virgin
Islands) intercompany deposits and collateralized public funds, were $ 10.3 billion or 19% at BPPR and $ 2.5 billion or 22% at
Popular U.S., compared to available liquidity sources of $ 15.3 billion at BPPR and $ 5.1 billion at Popular U.S.
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Table 14 - Deposits
31-Mar-24
Popular, Inc.
(Dollars in thousands)
BPPR
% of Total
Popular U.S.
% of Total
(Consolidated)
% of Total
Deposits:
Deposits balances under $250,000 [1]
$
24,111,245
45
%
$
7,912,597
70
%
$
32,023,842
50
%
Transactional deposits balances over
$250,000
8,119,072
15
%
2,093,183
18
%
10,212,255
16
%
Time deposits balances over $250,000
2,134,917
4
%
416,911
4
%
2,551,828
4
%
Uninsured foreign deposits
419,147
1
%
-
-
%
419,147
1
%
Collateralized public funds
18,307,794
34
%
293,918
3
%
18,601,712
29
%
Intercompany deposits
312,107
1
%
556,450
5
%
-
-
%
Total deposits
$
53,404,282
100
%
$
11,273,059
100
%
$
63,808,784
100
%
[1] Includes the first $250,000 in balances of transactional and time deposit accounts with balances in excess of $250,000.
31-Dec-23
Popular, Inc.
(Dollars in thousands)
BPPR
% of Total
Popular U.S.
% of Total
(Consolidated)
% of Total
Deposits
Deposits balances under $250,000 [1]
$
23,683,475
45
%
$
7,760,363
69
%
$
31,443,838
49
%
Transactional deposits balances over
$250,000
8,632,491
16
%
2,230,978
20
%
10,863,469
17
%
Time deposits balances over $250,000
1,926,005
4
%
361,315
3
%
2,287,320
4
%
Uninsured foreign deposits
418,334
1
%
-
-
%
418,334
1
%
Collateralized public funds
18,313,612
34
%
291,670
3
%
18,605,282
29
%
Intercompany deposits
159,163
-
%
626,312
6
%
-
-
%
Total deposits
$
53,133,080
100
%
$
11,270,638
100
%
$
63,618,243
100
%
[1] Includes the first $250,000 in balances of transactional and time deposit accounts with balances in excess of $250,000.
Bank Holding Companies
The principal sources of funding for the BHCs, which are Popular, Inc. (holding company only) and PNA, include cash on hand,
investment securities, dividends received from banking and non-banking subsidiaries, asset sales, credit facilities available from
affiliate banking subsidiaries and proceeds from potential securities offerings. Dividends from banking and non-banking subsidiaries
are subject to various regulatory limits and authorization requirements that are further described below and that may limit the ability
of those subsidiaries to act as a source of funding to the BHCs.
The principal uses of these funds include the repayment of debt, and interest payments to holders of senior debt and junior
subordinated deferrable interest (related to trust preferred securities), the payment of dividends to common stockholders,
repurchases of the Corporation’s securities and capitalizing its banking subsidiaries.
The outstanding balance of notes payable at the BHCs amounted to $593 million at March 31, 2024 and $592 million at December
31, 2023.
The contractual maturities of the BHCs notes payable at March 31, 2024 are presented in Table 15.
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Table 15 - Distribution of BHC's Notes Payable by Contractual Maturity
Year
(In thousands)
2028
$
394,285
Later years
198,353
Total
$
592,638
As of March 31, 2024, the BHCs had cash and money markets investments totaling $541 million and borrowing potential of $228
million from its secured facility with BPPR. The BHCs’ liquidity position continues to be adequate with sufficient cash on hand,
investments and other sources of liquidity that are expected to be sufficient to meet all interest payments and dividend obligations
for the foreseeable future. As indicated in Table 15 above, the BHC outstanding notes payable relate to $400 million in aggregate
principal amount of 7.25% Senior Notes due 2028 (the “Notes”) issued in an underwritten public offering during March of 2023.
Additionally, the Corporation’s latest quarterly dividend was $0.62 per share or approximately $45 million per quarter.
The BHCs have in the past borrowed in the corporate debt market primarily to finance their non-banking subsidiaries and refinance
debt obligations. The issuance of corporate debt as a source of funding is likely more costly due to the fact that two out of the three
principal credit rating agencies rate the Corporation below “investment grade”, which affects the Corporation’s cost and ability to
raise funds in the capital markets. Factors that the Corporation does not control, such as the economic outlook, interest rate
volatility, inflation, disruptions in the debt market, among others, could also affect its ability to obtain funding. The Corporation has
an automatic shelf registration statement filed and effective with the Securities and Exchange Commission, which permits the
Corporation to issue an unspecified amount of debt or equity securities.
Non-Banking Subsidiaries
The principal sources of funding for the non-banking subsidiaries include internally generated cash flows from operations, loan
sales, repurchase agreements, capital injections and borrowed funds from their direct parent companies or the holding companies.
The principal uses of funds for the non-banking subsidiaries include repayment of maturing debt, operational expenses and payment
of dividends to the BHCs. The liquidity needs of the non-banking subsidiaries are minimal since most of them are funded internally
from operating cash flows or from intercompany borrowings or capital contributions from their holding companies.
Dividends
During the quarter ended March 31, 2024, the Corporation declared cash dividends of $0.62 per common share outstanding ($44.8
million in the aggregate). The dividends for the Corporation’s Series A preferred stock amounted to $0.4 million. During the quarter
ended March 31, 2024, the BHCs received dividends and distributions amounting to $150 million from BPPR, $50 million from PNA,
$6 million from Popular Securities and $7 million from its non-banking subsidiaries.
Other Funding Sources and Capital
In addition to cash reserves held at the FRB that totaled $ 5.9 billion at March 31, 2024, the debt securities portfolio provides an
additional source of liquidity, which may be realized through either securities sales, collateralized borrowings or repurchase
agreements. The Corporation’s debt securities portfolio consists primarily of liquid U.S. government debt securities, U.S.
government sponsored agency debt securities, U.S. government sponsored agency mortgage-backed securities, and U.S.
government sponsored agency collateralized mortgage obligations that can be used to raise funds in the repo markets. The
availability of the repurchase agreement would be subject to having sufficient unpledged collateral available at the time the
transactions are consummated, in addition to overall liquidity and risk appetite of the various counterparties. In 2023, BPPR became
an approved counterparty in the Federal Reserve’s Standing Repo Facility. This allows approved counterparties to participate in
daily auctions with the Standing Repo Facility for up to $500 billion in aggregate of overnight financing using U.S. Treasuries and
Agency MBS as collateral. The Corporation’s unpledged debt securities amounted to $ 6.1 billion at March 31, 2024 and $ 4.6 billion
at December 31, 2023. A substantial portion of these debt securities could be used to raise financing in the U.S. money markets or
from secured lending sources, subject to changes in their fair market value and customary adjustments (haircuts).
Additional liquidity may be provided through loan maturities, prepayments and sales. The loan portfolio can also be used to obtain
funding in the capital markets. In particular, mortgage loans and some types of consumer loans, have secondary markets which the
Corporation could use.
Off-Balance Sheet Arrangements and Other Commitments
144
In the ordinary course of business, the Corporation engages in financial transactions that are not recorded on the balance sheet or
may be recorded on the balance sheet in amounts that are different than the full contract or notional amount of the transaction. As a
provider of financial services, the Corporation routinely enters into commitments with off-balance sheet risk to meet the financial
needs of its customers. These commitments may include loan commitments and standby letters of credit. These commitments are
subject to the same credit policies and approval process used for on-balance sheet instruments. These instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of financial position.
Refer to Note 20 to the Consolidated Financial Statements for information on the Corporation’s commitments to extent credit and
other non-credit commitments.
Other types of off-balance sheet arrangements that the Corporation enters in the ordinary course of business include derivatives,
operating leases and provision of guarantees, indemnifications, and representation and warranties. Refer to Note 27 to the
Consolidated Financial Statements for information on operating leases and to Note 19 to the Consolidated Financial Statements for
a detailed discussion related to the Corporation’s obligations under credit recourse and representation and warranties
arrangements.
The Corporation monitors its cash requirements, including its contractual obligations and debt commitments.
FDIC Special Assessments
On November 16, 2023, the Federal Deposit Insurance Corporation (“FDIC”) approved a final rule that imposes a special
assessment (the “FDIC Special Assessment”) to recover the losses to the deposit insurance fund resulting from the FDIC’s use, in
March 2023, of the systemic risk exception. In connection with this assessment, the Corporation recorded an expense of $71.4
million, $45.3 million net of tax, in the fourth quarter of 2023, representing the full amount of the estimated assessment at that time.
The special assessment amount and collection period may change as the estimated loss is periodically adjusted or if the total
amount collected varies. As a result, the Corporation recorded an additional expense of $14.3 million, $9.1 million net of tax, in the
first quarter of 2024, based on the updated loss estimates. Refer to the Overview section of Management’s Discussion and Analysis
included in this Form 10-Q for additional information of the FDIC Special Assessment.
Financial Information of Guarantor and Issuers of Registered Guaranteed Securities
The Corporation (not including any of its subsidiaries, “PIHC”) is the parent holding company of Popular North America “PNA” and
has other subsidiaries through which it conducts its financial services operations. PNA is an operating, 100% subsidiary of Popular,
Inc. Holding Company (“PIHC”) and is the holding company of its wholly-owned subsidiaries: Equity One, Inc. and PB, including
PB’s wholly-owned subsidiaries Popular Equipment Finance, LLC, Popular Insurance Agency, U.S.A., and E-LOAN, Inc.
PNA has issued junior subordinated debentures guaranteed by PIHC (together with PNA, the “obligor group”) purchased by
statutory trusts established by the Corporation. These debentures were purchased by the statutory trust using the proceeds from
trust preferred securities issued to the public (referred to as “capital securities”), together with the proceeds of the related issuances
of common securities of the trusts.
PIHC fully and unconditionally guarantees the junior subordinated debentures issued by PNA. PIHC’s obligation to make a
guarantee payment may be satisfied by direct payment of the required amounts to the holders of the applicable capital securities or
by causing the applicable trust to pay such amounts to such holders. Each guarantee does not apply to any payment of distributions
by the applicable trust except to the extent such trust has funds available for such payments. If PIHC does not make interest
payments on the debentures held by such trust, such trust will not pay distributions on the applicable capital securities and will not
have funds available for such payments. PIHC’s guarantee of PNA’s junior subordinated debentures is unsecured and ranks
subordinate and junior in right of payment to all the PIHC’s other liabilities in the same manner as the applicable debentures as set
forth in the applicable indentures; and equally with all other guarantees that the PIHC issues. The guarantee constitutes a guarantee
of payment and not of collection, which means that the guaranteed party may sue the guarantor to enforce its rights under the
respective guarantee without suing any other person or entity.
The principal sources of funding for PIHC and PNA have included dividends received from their banking and non-banking
subsidiaries, asset sales and proceeds from the issuance of debt and equity. As further described below, in the Risk to Liquidity
section, various statutory provisions limit the amount of dividends an insured depository institution may pay to its holding company
without regulatory approval.
145
The following summarized financial information presents the financial position of the obligor group, on a combined basis at March
31, 2024 and December 31, 2023, and the results of their operations for the quarters ended March 31, 2024 and March 31, 2023.
Investments in and equity in the earnings from the other subsidiaries and affiliates that are not members of the obligor group have
been excluded.
The summarized financial information of the obligor group is presented on a combined basis with intercompany balances and
transactions between entities in the obligor group eliminated. The obligor group's amounts due from, amounts due to and
transactions with subsidiaries and affiliates have been presented in separate line items, if they are material. In addition, related
parties transactions are presented separately.
146
Table 16 - Summarized Statement of Condition
(In thousands)
March 31, 2024
December 31, 2023
Assets
Cash and money market investments
$
541,400
$
388,025
Investment securities
32,470
29,973
Accounts receivables from non-obligor subsidiaries
15,466
14,469
Other loans (net of allowance for credit losses of $34 (2023 - $51))
26,603
26,906
Investment in equity method investees
5,267
5,265
Other assets
54,272
51,315
Total assets
$
675,478
$
515,953
Liabilities and Stockholders' deficit
Accounts payable to non-obligor subsidiaries
$
7,953
$
7,023
Notes payable
592,638
592,283
Other liabilities
130,379
114,660
Stockholders' deficit
(55,492)
(198,013)
Total liabilities and stockholders' deficit
$
675,478
$
515,953
Table 17 - Summarized Statement of Operations
For the quarters ended
(In thousands)
March 31, 2024
March 31, 2023
Income:
Dividends from non-obligor subsidiaries
$
163,000
$
50,000
Interest income from non-obligor subsidiaries and affiliates
3,289
810
Earnings from investments in equity method investees
2
-
Other operating income
1,787
1,146
Total income
$
168,078
$
51,956
Expenses:
Services provided by non-obligor subsidiaries and affiliates (net of
reimbursement by subsidiaries for services provided by parent of
$60,996 (2023 - $56,071))
$
3,204
$
4,989
Other expenses
37,010
4,486
Total expenses
$
40,214
$
9,475
Net income
$
127,864
$
42,481
During the quarter ended March 31, 2024, the obligor group recorded a $50.0 million of dividend distributions from a non-
obligor subsidiary wich was recorded as a reduction to the investment.
Risks to Liquidity
Total lines of credit outstanding, or available borrowing capacity under lines of credit are not necessarily a measure of the total credit
available on a continuing basis. These lines may be subject to collateral requirements, changes to the value of the collateral,
standards of creditworthiness, leverage ratios and other regulatory requirements, among other factors. Derivatives, such as those
embedded in long-term repurchase transactions or interest rate swaps, and off-balance sheet exposures, such as recourse,
147
performance bonds or credit card arrangements, are subject to collateral requirements. As their fair value increases, the collateral
requirements may increase, thereby reducing the balance of unpledged securities.
The importance of the Puerto Rico market for the Corporation is an additional risk factor that could affect its financing activities. In
the case of a deterioration in the outlook and/or credit ratings of its principal markets and/or due to regulatory changes and fiscal
conditions in Puerto Rico that are outside the control of the Corporation, the credit quality of the Corporation could be adversely
affected and result in higher credit costs. These adverse events could also affect the Corporation’s ability to obtain funding.
To plan for the possibility of such a scenario, management adopted contingency plans to address events that could limit or partially
limit important sources of funds that are usually fully available for use. These plans call for using alternate funding mechanisms,
such as the pledging of certain asset classes and accessing secured credit lines and loan facilities put in place with the FHLB and
the FRB. The Corporation is subject to positive tangible capital requirements to utilize secured loan facilities with the FHLB that
could result in a limitation of borrowing amounts or maturity terms, even if the Corporation exceeds well-capitalized regulatory
capital levels.
The credit ratings of Popular’s debt obligations are a relevant factor for liquidity because they impact the Corporation’s ability to
borrow in the capital markets, its cost and access to funding sources. Credit ratings are based on the financial strength, credit
quality and concentrations in the loan portfolio, the level and volatility of earnings, capital adequacy, the quality of management,
geographic concentration in Puerto Rico, the liquidity of the balance sheet, the availability of a significant base of core retail and
commercial deposits, and the Corporation’s ability to access a broad array of wholesale funding sources, among other factors.
Furthermore, various statutory provisions limit the amount of dividends an insured depository institution may pay to its holding
company without regulatory approval. A member bank must obtain the approval of the Federal Reserve Board for any dividend, if
the total of all dividends declared by the member bank during the calendar year would exceed the combined net income for that year
and the retained net income for the preceding two years, net of those years’ dividend activity, less any required transfers to surplus
or to a fund for the retirement of any preferred stock. In addition, a member bank may not declare or pay a dividend in an amount
greater than its undivided profits as reported in its Report of Condition and Income, unless the member bank has received the
approval of the Federal Reserve Board. A member bank also may not permit any portion of its permanent capital to be withdrawn
unless the withdrawal has been approved by the Federal Reserve Board. The ability of a bank subsidiary to up-stream dividends to
its BHC could thus be impacted by its financial performance and capital, including tangible and regulatory capital, thus potentially
limiting the amount of cash moving up to the BHCs from the banking subsidiaries. This could, in turn, affect the BHCs ability to
declare dividends on its outstanding common and preferred stock, repurchase its securities or meet its debt obligations, for
example.
During the quarter ended March 31, 2024, BPPR declared cash dividends of $150 million to PIHC. As of March 31, 2024, BPPR can
declare a dividend of approximately $410 million without prior approval of the Federal Reserve Board due to its retained income,
declared dividend activity and transfers to statutory reserves over the measurement period. Pursuant to the requirements listed
above, PB may not declare or pay a dividend without the prior approval of the Federal Reserve Board and the New York State
Department of Financial Services.
The Corporation’s banking subsidiaries have historically not used unsecured capital market borrowings to finance its operations, and
therefore are less sensitive to the level and changes in the Corporation’s overall credit ratings.
Refer to the Geographic and Government Risk section of this MD&A for some highlights on the status of the Puerto Rico economy
and the ongoing fiscal crisis.
Obligations Subject to Rating Triggers or Collateral Requirements
The Corporation’s banking subsidiaries currently do not issue unsecured senior debt, as these banking subsidiaries are funded
primarily with deposits and secured borrowings. The banking subsidiaries had $7.8 million in deposits at March 31, 2024 that are
subject to rating triggers.
In addition, certain mortgage servicing and custodial agreements that BPPR has with third parties include rating covenants. In the
event of a credit rating downgrade, the third parties have the right to require the institution to engage a substitute cash custodian for
escrow deposits and/or increase collateral levels securing the recourse obligations.
As discussed in Note 19 to the Consolidated Financial Statements, the Corporation services residential mortgage loans subject to
credit recourse provisions. Certain contractual agreements require the Corporation to post collateral to secure such recourse
obligations if the institution’s required credit ratings are not maintained. Collateral pledged by the Corporation to secure recourse
148
obligations amounted to approximately $25.2 million at March 31, 2024. The Corporation could be required to post additional
collateral under the agreements. Management expects that it would be able to meet additional collateral requirements if and when
needed. The requirements to post collateral under certain agreements or the loss of escrow deposits could reduce the Corporation’s
liquidity resources and impact its operating results.
Credit Risk
Geographic and Government Risk
The Corporation is exposed to geographic and government risk. The Corporation’s assets and revenue composition by geographical
area and by business segment reporting are presented in Note 32 to the Consolidated Financial Statements.
Commonwealth of Puerto Rico
A significant portion of our financial activities and credit exposure is concentrated in the Commonwealth of Puerto Rico (“Puerto
Rico”), which has faced severe economic and fiscal challenges in the past and may face additional challenges in the future.
Economic Performance.
Puerto Rico’s economy suffered a severe and prolonged recession from 2007 to 2017, with real gross national product (“GNP”)
contracting approximately 15% during this period. In 2017, Hurricane María caused significant damage and destruction across the
island, resulting in further economic contraction. Puerto Rico’s economy has been gradually recovering since 2018, in part aided by
the large amount of federal disaster relief and recovery assistance funds injected into the Puerto Rico economy in connection with
Hurricane María and other recent natural disasters. This growth was interrupted by the economic shock caused by the COVID-19
pandemic in 2020, but has since resumed, in part aided by additional federal assistance from pandemic-related stimulus measures.
The latest Puerto Rico Economic Activity Index, published by the Economic Development Bank for Puerto Rico (the “Economic
Activity Index”), reflected a 0.8% year-over-year decline in March 2024, compared to March 2023, and essentially remained
unchanged from February 2024 to March 2024. The Economic Activity Index is a coincident indicator of ongoing economic activity
but not a direct measurement of real GNP. The Puerto Rico Planning Board estimates that Puerto Rico’s real GNP grew 0.7%
during fiscal year 2023 (July 2022-June 2023) and projects 2.8% real GNP growth for fiscal year 2024 (July 2023-June-2024).
While the Puerto Rico economy has not directly tracked the United States economy in recent years, many of the external factors
that impact the Puerto Rico economy are affected by the policies and performance of the United States economy. These external
factors include the level of interest rates and the rate of inflation. Inflation in the United States, as measured by the United States
Consumer Price Index (published by the U.S. Bureau of Labor Statistics), increased 3.5% during the 12-month period ended March
2024. Inflation in Puerto Rico, as measured by the Puerto Rico Consumer Price Index (published by the Department of Labor and
Human Resources of Puerto Rico), increased 1.9% during the 12-month period ended February 2024. The rate of inflation gradually
decreased from a mid-2022 peak, as the Federal Reserve implemented a series of benchmark interest rate increases.
Fiscal Challenges.
As the Puerto Rico economy contracted, the government’s public debt rose rapidly, in part from borrowing to cover deficits to pay
debt service, pension benefits and other government expenditures. By 2016, the Puerto Rico government had over $120 billion in
combined debt and unfunded pension liabilities, had lost access to the capital markets, and was in the midst of a fiscal crisis.
Puerto Rico’s escalating fiscal and economic challenges and imminent widespread defaults in its public debt prompted the U.S.
Congress to enact the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) in June 2016. PROMESA
created the “Oversight Board” with ample powers over Puerto Rico’s fiscal and economic affairs and those of its public corporations,
instrumentalities and municipalities (collectively, “PR Government Entities”). Pursuant to PROMESA, the Oversight Board will be in
place until market access is restored and balanced budgets are produced for at least four consecutive years. PROMESA also
established two mechanisms for the restructuring of the obligations of PR Government Entities: (a) Title III, which provides an in-
court process that incorporates many of the powers and provisions of the U.S. Bankruptcy Code and permits adjustment of a broad
149
range of obligations, and (b) Title VI, which provides for a largely out-of-court process through which modifications to financial debt
can be accepted by a supermajority of creditors and bind holdouts.
Since 2017, Puerto Rico and several of its instrumentalities have availed themselves of the debt restructuring mechanisms of Titles
III and VI of PROMESA. The Puerto Rico government emerged from Title III of PROMESA in March 2022. Several instrumentalities,
including Government Development Bank for Puerto Rico, the Puerto Rico Sales Tax Financing Corporation, the Puerto Rico
Highways and Transportation Authority, and the Puerto Rico Industrial Development Company, have also completed debt
restructurings under Titles III or VI of PROMESA. While the majority of the debt has already been restructured, some PR
Government Entities still face significant fiscal challenges. For example, the Puerto Rico Electric Power Authority is still in the
process of restructuring its debts under Title III of PROMESA.
Municipalities.
Puerto Rico’s fiscal and economic challenges have also adversely impacted its municipalities. Budgetary subsidies to municipalities
have gradually declined in recent years and were scheduled to be ultimately eliminated by fiscal year 2025 as part of the fiscal
measures required by the Oversight Board. However, over the past years, the Oversight Board has authorized and funded new
appropriations and investments to offset the decline in intergovernmental transfers to municipalities. Beyond those sources of
alternate funding, municipalities have also received significant federal disaster and COVID-relief funding in recent years. According
to the latest Puerto Rico fiscal plan certified by the Oversight Board, taken together, the funding available to municipalities in the
near-term is substantial. The fiscal plan notes, however, that the desired progress to achieve fiscal discipline and implement critical
reforms has not been achieved, and that municipalities must work with the Executive branch to analyze the financial needs of each
individual municipality and focus on the necessary enhancements in municipal shared services and other municipal and government
initiatives. Pursuant to the fiscal plan, once the transformational measures and milestones related to these initiatives are achieved,
additional funding from the central government may be made available to municipalities to improve fiscal sustainability.
Municipalities are subject to PROMESA and, at the Oversight Board’s request, are required to submit fiscal plans and annual
budgets to the Oversight Board for its review and approval. They are also required to seek Oversight Board approval to issue,
guarantee or modify their debts and to enter into contracts with an aggregate value of $10 million or more. With the Oversight
Board’s approval, municipalities are also eligible to avail themselves of the debt restructuring processes provided by PROMESA. To
date, however, no municipality has been subject to any such debt restructuring process.
Exposure of the Corporation
The credit quality of BPPR’s loan portfolio reflects, among other things, the general economic conditions in Puerto Rico and other
adverse conditions affecting Puerto Rico consumers and businesses. Deterioration in the Puerto Rico economy has resulted in the
past, and could result in the future, in higher delinquencies, greater charge-offs and increased losses, which could materially affect
our financial condition and results of operations.
At March 31, 2024, the Corporation’s direct exposure to PR Government Entities totaled $388 million, of which $363 million were
outstanding, compared to $362 million at December 31, 2023, of which $333 million were outstanding. A deterioration in Puerto
Rico’s fiscal and economic situation could adversely affect the value of our Puerto Rico government obligations, resulting in losses
to us. Of the amount outstanding, $348 million consists of loans and $16 million are securities ($314 million and $19 million,
respectively, at December 31, 2023). Substantially all of the Corporation’s direct exposure outstanding at March 31, 2024 were
obligations from various Puerto Rico municipalities. In most cases, these were “general obligations” of a municipality, to which the
applicable municipality has pledged its good faith, credit and unlimited taxing power, or “special obligations” of a municipality, to
which the applicable municipality has pledged basic property tax or sales tax revenues. At March 31, 2024, 78% of the Corporation’s
exposure to municipal loans and securities was concentrated in the municipalities of San Juan, Guaynabo, Carolina and Caguas.
For additional discussion of the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and
municipalities, refer to Note 20 – Commitments and Contingencies to the Consolidated Financial Statements.
In addition, at March 31, 2024, the Corporation had $233 million in loans insured or securities issued by Puerto Rico governmental
entities, but for which the principal source of repayment is non-governmental ($238 million at December 31, 2023). These included
$187 million in residential mortgage loans insured by the Puerto Rico Housing Finance Authority (“HFA”), a PR Government Entity
(December 31, 2023 - $191 million). These mortgage loans are secured by first mortgages on Puerto Rico residential properties and
the HFA insurance covers losses in the event of a borrower default and upon the satisfaction of certain other conditions. The
Corporation also had at March 31, 2024, $39 million in bonds issued by HFA which are secured by second mortgage loans on
150
Puerto Rico residential properties, and for which HFA also provides insurance to cover losses in the event of a borrower default, and
upon the satisfaction of certain other conditions (December 31, 2023 - $40 million). In the event that the mortgage loans insured by
HFA and held by the Corporation directly or those serving as collateral for the HFA bonds default and the collateral is insufficient to
satisfy the outstanding balance of these loans, HFA’s ability to honor its insurance will depend, among other factors, on the financial
condition of HFA at the time such obligations become due and payable. The Corporation does not consider the government
guarantee when estimating the credit losses associated with this portfolio.
BPPR’s commercial loan portfolio also includes loans to private borrowers who are service providers, lessors, suppliers or have
other relationships with the government. These borrowers could be negatively affected by a deterioration in the fiscal and economic
situation of PR Government Entities. Similarly, BPPR’s mortgage and consumer loan portfolios include loans to government
employees and retirees, which could also be negatively affected by fiscal measures, such as employee layoffs or furloughs or
reductions in pension benefits, if the fiscal and economic situation deteriorates.
As of March 31, 2024, BPPR had $18.0 billion in deposits from the Puerto Rico government, its instrumentalities, and municipalities.
The rate at which public deposit balances may decline is uncertain and difficult to predict. The amount and timing of any such
reduction is likely to be impacted by, for example, the speed at which federal assistance is distributed and the financial condition,
liquidity and cash management practices of such entities, as well as on the ability of BPPR to maintain these customer relationships.
The Corporation may also have direct exposure with regards to avoidance and other causes of action initiated by the Oversight
Board on behalf of the Commonwealth or other Title III debtors. For additional information regarding such exposure, refer to Note 20
to the Consolidated Financial Statements.
United States Virgin Islands
The Corporation has operations in the United States Virgin Islands (the “USVI”) and has credit exposure to USVI government
entities.
The USVI has been experiencing a number of fiscal and economic challenges, which could adversely affect the ability of its public
corporations and instrumentalities to service their outstanding debt obligations. PROMESA does not apply to the USVI and, as such,
there is currently no federal legislation permitting the restructuring of the debts of the USVI and its public corporations and
instrumentalities.
To the extent that the fiscal condition of the USVI continues to deteriorate, the U.S. Congress or the Government of the USVI may
enact legislation allowing for the restructuring of the financial obligations of USVI government entities or imposing a stay on creditor
remedies, including by making PROMESA applicable to the USVI.
At March 31, 2024, the Corporation had approximately $28 million in direct exposure to USVI government entities (December 31,
2023 - $28 million).
British Virgin Islands
The Corporation has operations in the British Virgin Islands (“BVI”), which was negatively affected by the COVID-19 pandemic,
particularly as a reduction in the tourism activity which accounts for a significant portion of its economy. Although the Corporation
has no significant exposure to a single borrower in the BVI, at March 31, 2024, it has a loan portfolio amounting to approximately
$208 million comprised of various retail and commercial clients, compared to a loan portfolio of $205 million at December 31, 2023.
U.S. Government
As further detailed in Notes 5 and 6 to the Consolidated Financial Statements, a substantial portion of the Corporation’s investment
securities represented exposure to the U.S. Government in the form of U.S. Government sponsored entities, as well as agency
mortgage-backed and U.S. Treasury securities. In addition, $1.9 billion of residential mortgages, and $92.4 million commercial loans
were insured or guaranteed by the U.S. Government or its agencies at March 31, 2024 (compared to $1.9 billion and $89.2 million,
respectively, at December 31, 2023).
Non-Performing Assets
Non-performing assets (“NPAs”) include primarily past-due loans that are no longer accruing interest, renegotiated loans, and real
estate property acquired through foreclosure. A summary, including certain credit quality metrics, is presented in Table 18.
151
During the first quarter of 2024, the Corporation reflected stable credit quality when compared to the previous quarter. Non-
performing loans (“NPLs”) and net charge offs (“NCOs”) remained below historical averages and delinquencies improved in most
loan categories from the prior quarter. We continue to closely monitor changes in the macroeconomic environment and on borrower
performance given higher interest rates and inflationary pressures. However, management believes that the improvements over
recent years in risk management practices and the risk profile of the Corporation’s loan portfolios position Popular to continue to
operate successfully under the current challenging environment.
Total NPAs as of March 31, 2024 decreased by $3 million when compared with December 31, 2023. Total non-performing loans
held-in-portfolio (“NPLs”) decreased by $3 million from December 31, 2023. BPPR’s NPLs decreased by $30 million, broadly
reflected across most loan categories. The commercial NPLs decrease includes a $5.1 million charge-off related to a previously
reserved $18 million relationship. Popular US NPLs increased by $27 million, driven by a $17 million increase in mortgage NPLs,
impacted by a single loan. The Corporation has no other credit exposure to this borrower.
On March 31, 2024 , the ratio of NPLs to total loans held-in-portfolio was 1.0%, flat when compared to December 31, 2023. Other
real estate owned loans (“OREOs”) remained flat from December 31, 2023. On March 31, 2024, NPLs secured by real estate
amounted to $211 million in the Puerto Rico operations and $49 million in Popular U.S, compared with $231 million and $24 million,
respectively, on December 31, 2023.
The Corporation’s commercial loan portfolio secured by real estate (“CRE”) amounted to $10.6 billion on March 31, 2024, of which
$3.1 billion was secured with owner occupied properties, compared with $10.6 billion and $3.1 billion, respectively, on December 31,
2023. Office space leasing exposure in our non-owner occupied CRE portfolio is limited, representing only 1.8% or $633 million of
our total loan portfolio. The exposure is mainly comprised of low- to mid- rise properties with average loan size of $2.0 million and is
well diversified across tenant type.
CRE NPLs amounted to $49 million on March 31, 2024, compared with $48 million on December 31, 2023. The CRE NPL ratios for
the BPPR and Popular U.S. segments were 0.72% and 0.26%, respectively, on March 31, 2024, compared with 0.86% and 0.13%,
respectively, on December 31, 2023.
In addition to the NPLs included in Table 18, on March 31, 2024, there were $513 million of performing loans, mostly commercial
loans, which in management’s opinion, are currently subject to potential future classification as non-performing (December 31, 2023
- $510 million).
For the quarter ended March 31, 2024, total inflows of NPLs held-in-portfolio, excluding consumer loans, increased by $10 million,
when compared to the inflows for the same period in 2023. Inflows of NPLs held-in-portfolio at the BPPR segment decreased by $17
million, compared to the same period in 2023, mainly driven by lower commercial and mortgage inflows by $12 million and $5
million, respectively. Inflows of NPLs held-in-portfolio at the Popular U.S. segment increased by $27 million from the same period in
2023, mainly driven by higher mortgage and commercial inflows by $17 million and $9 million, respectively.
152
Table 18 - Non-Performing Assets
March 31, 2024
December 31, 2023
(Dollars in thousands)
BPPR
Popular
U.S.
Popular,
Inc.
As a % of
loans HIP
by
category
BPPR
Popular
U.S.
Popular,
Inc.
As a % of
loans HIP
by
category
Commercial
Commercial multi-family
$
106
$
8,700
$
8,806
0.4
%
$
1,991
$
-
$
1,991
0.1
%
Commercial real estate non-owner
occupied
7,922
2,407
10,329
0.2
8,745
1,117
9,862
0.2
Commercial real estate owner
occupied
26,124
3,877
30,001
1.0
29,430
6,274
35,704
1.2
Commercial and industrial
29,171
6,423
35,594
0.5
32,826
3,772
36,598
0.5
Total Commercial
63,323
21,407
84,730
0.5
72,992
11,163
84,155
0.5
Construction
-
-
-
-
6,378
-
6,378
0.7
Leasing
7,267
-
7,267
0.4
8,632
-
8,632
0.5
Mortgage
166,473
28,071
194,544
2.5
175,106
11,191
186,297
2.4
Consumer
-
3,986
3,986
6.0
-
3,733
3,733
5.7
19,092
2,068
21,160
1.1
19,031
2,805
21,836
1.1
41,807
-
41,807
1.1
45,615
-
45,615
1.2
632
1
633
0.4
964
1
965
0.6
Total Consumer
61,531
6,055
67,586
1.0
65,610
6,539
72,149
1.0
Total non-performing loans held-in-
portfolio
298,594
55,533
354,127
1.0
%
328,718
28,893
357,611
1.0
%
Other real estate owned (“OREO”)
80,218
324
80,542
80,176
240
80,416
Total non-performing assets
[1]
$
378,812
$
55,857
$
434,669
$
408,894
$
29,133
$
438,027
Accruing loans past due 90 days or
more
[2]
$
247,330
$
212
$
247,542
$
268,362
$
109
$
268,471
Ratios:
Non-performing assets to total assets
0.68
%
0.37
%
0.61
%
0.74
%
0.19
%
0.62
%
Non-performing loans held-in-portfolio
to loans held-in-portfolio
1.21
0.53
1.01
1.34
0.27
1.02
Allowance for credit losses to loans
held-in-portfolio
2.62
0.91
2.11
2.61
0.85
2.08
Allowance for credit losses to non-
performing loans, excluding held-for-
sale
215.79
171.47
208.84
194.65
309.70
203.95
[1] There were no non-performing loans held-for-sale as of March 31, 2024 and December 31, 2023.
[2] It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90
days or more as opposed to non-performing since the principal repayment is insured. These balances include $93 million of residential mortgage
loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of March 31, 2024 (December 31, 2023 - $106 million).
Furthermore, the Corporation has approximately $37 million in reverse mortgage loans which are guaranteed by FHA, but which are currently not
accruing interest. Due to the guaranteed nature of the loans, it is the Corporation’s policy to exclude these balances from non-performing assets
(December 31, 2023 - $38 million).
153
Table 19 - Activity in Non -Performing Loans Held-in-Portfolio (Excluding Consumer Loans)
For the quarter ended March 31, 2024
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$
254,476
$
22,354
$
276,830
Plus:
New non-performing loans
33,503
35,373
68,876
Advances on existing non-performing loans
-
22
22
Less:
Non-performing loans transferred to OREO
(4,109)
-
(4,109)
Non-performing loans charged-off
(8,309)
(950)
(9,259)
Loans returned to accrual status / loan collections
(45,765)
(7,321)
(53,086)
Ending balance - NPLs
$
229,796
$
49,478
$
279,274
Table 20 - Activity in Non -Performing Loans Held-in-Portfolio (Excluding Consumer Loans)
For the quarter ended March 31, 2023
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$
324,562
$
31,356
$
355,918
Plus:
New non-performing loans
50,613
8,531
59,144
Advances on existing non-performing loans
-
65
65
Less:
Non-performing loans transferred to OREO
(10,873)
(58)
(10,931)
Non-performing loans charged-off
(1,176)
(216)
(1,392)
Loans returned to accrual status / loan collections
(48,099)
(13,911)
(62,010)
Ending balance - NPLs
$
315,027
$
25,767
$
340,794
Table 21 - Activity in Non -Performing Commercial Loans Held-In-Portfolio
For the quarter ended March 31, 2024
(In thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$
72,992
$
11,163
$
84,155
Plus:
New non-performing loans
4,343
15,039
19,382
Advances on existing non-performing loans
-
20
20
Less:
Non-performing loans charged-off
(7,999)
(950)
(8,949)
Loans returned to accrual status / loan collections
(6,013)
(3,865)
(9,878)
Ending balance - NPLs
$
63,323
$
21,407
$
84,730
154
Table 22 - Activity in Non -Performing Commercial Loans Held-In-Portfolio
For the quarter ended March 31, 2023
(In thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$
82,171
$
10,868
$
93,039
Plus:
New non-performing loans
16,594
5,719
22,313
Advances on existing non-performing loans
-
26
26
Less:
Non-performing loans transferred to OREO
(287)
-
(287)
Non-performing loans charged-off
(673)
(216)
(889)
Loans returned to accrual status / loan collections
(6,853)
(5,349)
(12,202)
Ending balance - NPLs
$
90,952
$
11,048
$
102,000
Table 23 - Activity in Non-Performing Construction Loans Held-In-Portfolio
For the quarter ended March 31, 2024
(In thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$
6,378
$
-
$
6,378
Less:
Loans returned to accrual status / loan collections
(6,378)
-
(6,378)
Ending balance - NPLs
$
-
$
-
$
-
Table 24 - Activity in Non -Performing Mortgage Loans Held-in-Portfolio
For the quarter ended March 31, 2024
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$
175,106
$
11,191
$
186,297
Plus:
New non-performing loans
29,160
20,334
49,494
Advances on existing non-performing loans
-
2
2
Less:
Non-performing loans transferred to OREO
(4,109)
-
(4,109)
Non-performing loans charged-off
(310)
-
(310)
Loans returned to accrual status / loan collections
(33,374)
(3,456)
(36,830)
Ending balance - NPLs
$
166,473
$
28,071
$
194,544
Table 25 - Activity in Non -Performing Mortgage Loans Held-in-Portfolio
For the quarter ended March 31, 2023
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$
242,391
$
20,488
$
262,879
Plus:
New non-performing loans
34,019
2,812
36,831
Advances on existing non-performing loans
-
39
39
Less:
Non-performing loans transferred to OREO
(10,586)
(58)
(10,644)
Non-performing loans charged-off
(503)
-
(503)
Loans returned to accrual status / loan collections
(41,246)
(8,562)
(49,808)
Ending balance - NPLs
$
224,075
$
14,719
$
238,794
155
Loan Delinquencies
Another key measure used to evaluate and monitor the Corporation’s asset quality is loan delinquencies. Loans delinquent 30 days
or more, as a percentage of their related portfolio category on March 31, 2024 and December 31, 2023, are presented below.
Table 26 - Loan Delinquencies
(Dollars in thousands)
March 31, 2024
December 31, 2023
Loans delinquent
30 days or more
Total loans
Total delinquencies
as a percentage
Loans delinquent
30 days or more
Total loans
Total delinquencies
as a percentage
Commercial
Commercial multi-family
$
33,651
$
2,384,635
1.41
%
$
13,657
$
2,415,620
0.57
%
Commercial real estate
non-owner occupied
18,089
5,057,059
0.36
17,051
5,087,421
0.34
Commercial real estate
owner occupied
62,177
3,117,844
1.99
69,239
3,080,635
2.25
Commercial and industrial
62,536
7,025,483
0.89
58,953
7,126,121
0.83
Total Commercial
176,453
17,585,021
1.00
158,900
17,709,797
0.90
Construction
8,825
1,009,303
0.87
6,378
959,280
0.66
Leasing
31,955
1,765,413
1.81
35,491
1,731,809
2.05
Mortgage
[1]
800,456
7,783,662
10.28
859,537
7,695,917
11.17
Consumer
Credit cards
46,420
1,142,153
4.06
46,436
1,135,747
4.09
Home equity lines of credit
5,455
66,717
8.18
5,465
65,953
8.29
Personal
56,988
1,897,010
3.00
59,682
1,945,247
3.07
Auto
143,184
3,706,854
3.86
173,119
3,660,780
4.73
Other
2,112
162,605
1.30
3,063
160,441
1.91
Total Consumer
254,159
6,975,339
3.64
287,765
6,968,168
4.13
Loans held-for-sale
-
5,352
-
-
4,301
-
Total
$
1,271,848
$
35,124,090
3.62
%
$
1,348,071
$
35,069,272
3.84
%
[1] Loans delinquent 30 days or more includes $0.4 billion of residential mortgage loans insured by FHA or guaranteed by the VA as of March 31,
2024 (December 31, 2023 - $0.5 billion). Refer to Note 7 to the Consolidated Financial Statements for additional information of guaranteed loans.
Allowance for Credit Losses Loans Held-in-Portfolio
The ACL, represents management’s estimate of expected credit losses through the remaining contractual life of the different loan
segments, impacted by expected prepayments. The ACL is maintained at a sufficient level to provide for estimated credit losses on
collateral dependent loans as well as loans modified for borrowers with financial difficulties separately from the remainder of the loan
portfolio. The Corporation’s management evaluates the adequacy of the ACL on a quarterly basis. In this evaluation, management
considers current conditions, macroeconomic economic expectations through a reasonable and supportable period, historical loss
experience, portfolio composition by loan type and risk characteristics, results of periodic credit reviews of individual loans, and
regulatory requirements, amongst other factors.
The Corporation must rely on estimates and exercise judgment regarding matters where the ultimate outcome is unknown, such as
economic developments affecting specific customers, industries, or markets. Other factors that can affect management’s estimates
are recalibration of statistical models used to calculate lifetime expected losses, changes in underwriting standards, financial
accounting standards and loan impairment measurements, among others. Changes in the financial condition of individual borrowers,
in economic conditions, and in the condition of the various markets in which collateral may be sold, may also affect the required
level of the allowance for credit losses. Consequently, the business financial condition, liquidity, capital, and results of operations
could also be affected.
156
On March 31, 2024, the ACL increased by $10 million from December 31, 2023, to $740 million. The ACL for BPPR increased by $4
million, primarily driven by higher reserves for the consumer portfolios attributable to changes in credit quality. In PB, the ACL
increased by $6 million, when compared to December 31, 2023, mainly driven by higher reserves for the commercial portfolio due to
changes in credit risk ratings. The Corporation’s ratio of the allowance for credit losses to loans held-in-portfolio was 2.11% on
March 31, 2024, compared to 2.08% on December 31, 2023. The ratio of the allowance for credit losses to NPLs held-in-portfolio
stood at 208.8%, compared to 204.0% on December 31, 2023.
Given that any one economic outlook is inherently uncertain, the Corporation leverages multiple scenarios to estimate its ACL. The
baseline scenario continues to be assigned the highest probability, followed by the pessimistic scenario. The weight assigned to the
pessimistic scenario decreased during the first quarter of 2024 in response to the positive momentum in the economy as
expectations for the Federal Reserve achieving a soft landing have improved. The Corporation evaluates, at least on an annual
basis, the assumptions tied to the CECL accounting framework. These include the reasonable and supportable period as well as the
reversion window.
The 2024 annualized GDP growth in the baseline scenario improved to 2.0% and 2.3% for Puerto Rico and the United States,
respectively, compared to 1.2% and 1.7% in the previous quarter. The 2024 forecasted average unemployment rate for Puerto Rico
and the United States remained stable at 6.5% and 3.9%, respectively, compared to 6.8% and 4.0% in previous forecast.
The provision for credit losses for the period ended March 31, 2024, was $72.4 million, compared to an expense of $47.1 million for
the period ended March 31, 2023, mostly related to higher NCOs due to credit normalization. Refer to Note 8 to the Consolidated
Financial Statements, and to the Provision for Credit Losses section of this MD&A for additional information.
157
Table 27 - Allowance for Credit Losses - Loan Portfolios
March 31, 2024
(Dollars in thousands)
Total ACL
Total loans held-
in-portfolio
ACL to loans held-
in-portfolio
Total non-
performing loans
held-in-portfolio
ACL to non-
performing loans
held-in-portfolio
Commercial
$
12,743
$
2,384,635
0.53
%
8,806
144.71
%
65,624
5,057,059
1.30
%
10,329
635.34
%
63,807
3,117,844
2.05
%
30,001
212.68
%
120,418
7,025,483
1.71
%
35,594
338.31
%
Total Commercial
$
262,592
$
17,585,021
1.49
%
84,730
309.92
%
Construction
11,139
1,009,303
1.10
%
-
N.M.
Leasing
8,991
1,765,413
0.51
%
7,267
123.72
%
Mortgage
86,438
7,783,662
1.11
%
194,544
44.43
%
Consumer
88,169
1,142,153
7.72
%
-
N.M.
1,872
66,717
2.81
%
3,986
46.96
%
116,077
1,897,010
6.12
%
21,160
548.57
%
157,456
3,706,854
4.25
%
41,807
376.63
%
6,810
162,605
4.19
%
633
1,075.83
%
Total Consumer
$
370,384
$
6,975,339
5.31
%
67,586
548.02
%
Total
$
739,544
$
35,118,738
2.11
%
354,127
208.84
%
N.M - Not meaningful.
Table 28 - Allowance for Credit Losses - Loan Portfolios
December 31, 2023
(Dollars in thousands)
Total ACL
Total loans held-
in-portfolio
ACL to loans held-
in-portfolio
Total non-
performing loans
held-in-portfolio
ACL to non-
performing loans
held-in-portfolio
Commercial
$
13,740
$
2,415,620
0.57
%
1,991
690.11
%
65,453
5,087,421
1.29
%
9,862
663.69
%
56,864
3,080,635
1.85
%
35,704
159.27
%
122,356
7,126,121
1.72
%
36,598
334.32
%
Total Commercial
$
258,413
$
17,709,797
1.46
%
84,155
307.07
%
Construction
12,686
959,280
1.32
%
6,378
198.90
%
Leasing
9,708
1,731,809
0.56
%
8,632
112.47
%
Mortgage
83,214
7,695,917
1.08
%
186,297
44.67
%
Consumer
80,487
1,135,747
7.09
%
-
N.M.
1,978
65,953
3.00
%
3,733
52.99
%
117,790
1,945,247
6.06
%
21,836
539.43
%
157,931
3,660,780
4.31
%
45,615
346.23
%
7,134
160,441
4.45
%
965
739.27
%
Total Consumer
$
365,320
$
6,968,168
5.24
%
72,149
506.34
%
Total
$
729,341
$
35,064,971
2.08
%
357,611
203.95
%
N.M - Not meaningful.
158
Annualized net charge-offs (recoveries)
The following tables present annualized net charge-offs (recoveries) to average loans held-in-portfolio (“HIP”) by loan category for
the quarters ended March 31, 2024 and 2023.
Table 29 - Annualized Net Charge-offs (Recoveries) to Average Loans Held-in-Portfolio
Quarter ended March 31, 2024
Quarter ended March 31, 2023
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Commercial
0.30
%
0.04
%
0.18
%
(0.06)
%
(0.13)
%
(0.09)
%
Mortgage
(0.28)
(0.01)
(0.23)
(0.26)
―
(0.22)
Leasing
0.85
―
0.85
0.08
―
0.08
Consumer
2.98
8.43
3.16
2.31
4.81
2.43
Total annualized net charge-offs to
average loans held-in-portfolio
0.92
%
0.21
%
0.71
%
0.56
%
0.06
%
0.41
%
NCOs for the quarter ended March 31, 2024, amounted to $62 million, increasing by $29 million when compared to the same period
in 2023. The BPPR segment increased by $25 million mainly driven by higher consumer and commercial NCOs by $14 million and
$8 million, respectively. Consumer NCOs increase is reflective of post-pandemic credit normalization The PB segment NCOs
increased by $4 million, mainly driven by higher commercial NCOs by $3 million.
Loan Modifications
For the quarter ended March 31, 2024, modified loans to borrowers with financial difficulty amounted to $92 million, of which $83
million were in accruing status. The BPPR segment’s modifications to borrowers with financial difficulty amounted to $92 million,
mainly comprised of commercial and mortgage loans of $73 million and $16 million, respectively. A total of $11 million of the
mortgage modifications were related to government guaranteed loans. The Popular U.S. segment’s modifications to borrowers with
financial difficulty amounted to $188 thousand, mostly comprised of personal loans.
Refer to Note 8 to the Consolidated Financial Statements for additional information on modifications made to borrowers
experiencing financial difficulties.
ADOPTION OF NEW ACCOUNTING STANDARDS AND ISSUED BUT NOT YET EFFECTIVE ACCOUNTING STANDARDS
Refer to Note 3, “New Accounting Pronouncements” to the Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosures for the current period can be found in the Market Risk section of this report, which includes
changes in market risk exposures from disclosures presented in the 2023 Form 10-K.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Corporation’s management, with the participation of the Corporation’s Chief Executive Officer and Chief Financial Officer, has
evaluated the effectiveness of the Corporation’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report. Based
on such evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such
159
period, the Corporation’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a
timely basis, information required to be disclosed by the Corporation in the reports that it files or submits under the Exchange Act
and such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding
required disclosures.
Internal Control Over Financial Reporting
There have been no changes in the Corporation’s internal control over financial reporting (as such term is defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2024 that have materially affected, or are
reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
Part II - Other Information
Item 1. Legal Proceedings
For a discussion of Legal Proceedings, see Note 20 to the Consolidated Financial Statements.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed under “Part I - Item
1A - Risk Factors” in our 2023 Form 10-K. These factors could materially adversely affect our business, financial condition, liquidity,
results of operations and capital position, and could cause our actual results to differ materially from our historical results or the
results contemplated by the forward-looking statements contained in this report. Also refer to the discussion in “Part I - Item 2 –
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report for additional information
that may supplement or update the discussion of risk factors below and in our 2023 Form 10-K.
There have been no material changes to the risk factors previously disclosed under Item 1A of the Corporation’s 2023 Form 10-K.
The risks described in our 2023 Form 10-K and in this report are not the only risks facing us. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial
condition, liquidity, results of operations and capital position.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Corporation did not have any unregistered sales of equity securities during the quarter ended March 31, 2024.
Issuer Purchases of Equity Securities
The following table sets forth the details of purchases of Common Stock by the Corporation during the quarter ended March 31,
2024:
Issuer Purchases of Equity Securities
Not in thousands
Period
Total Number of
Shares Purchased [1]
Average Price Paid per
Share
Total Number of Shares
Purchased as Part of Publicly
Announced Plans or Programs
Approximate Dollar Value of
Shares that May Yet be
Purchased Under the Plans or
Programs
January 1 - January 31
-
$
-
-
$-
February 1 - February 29
559
83.46
-
-
March 1 - March 31
42,092
83.47
-
-
Total
42,651
$
83.47
-
-
[1] Includes 559 and 42,092 shares of the Corporation’s common stock acquired by the Corporation during February 2024 and March 2024,
respectively, in connection with the satisfaction of tax withholding obligations on vested awards of restricted stock or restricted stock units granted to
directors and certain employees under the Corporation’s Omnibus Incentive Plan. The acquired shares of common stock were added back to treasury
stock.
160
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Plans or Other Preplanned Trading Arrangements
Certain of our officers or directors have made, and may from time to time make, elections to
participate in
, and are participating in,
our dividend reinvestment and purchase plan, the Company stock fund associated with our 401(k) plans and/or the Company stock
fund associated with our non-qualified deferred compensation plans and have shares withheld to cover withholding taxes upon the
vesting of equity awards, which may be designed to satisfy the affirmative defense conditions of Rule 10b5-1 under the Exchange
Act or may constitute non-Rule 10b5–1
trading arrangements
161
Item 6. Exhibits
Exhibit Index
Exhibit No
Exhibit Description
10.1
22.1
31.1
31.2
32.1
32.2
101. INS
XBRL Instance Document – the instance document does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline Document.
101.SCH
Inline Taxonomy Extension Schema Document
(1)
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
(1)
101.DEF
Inline XBRL Taxonomy Extension Definitions Linkbase Document
(1)
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
(1)
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
(1)
104
The cover page of Popular, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2024,
formatted in Inline XBRL (included within the Exhibit 101 attachments)
(1)
(1) Included herewith
Popular, Inc. has not filed as exhibits certain instruments defining the rights of holders of debt of Popular, Inc. not
exceeding 10% of the total assets of Popular, Inc. and its consolidated subsidiaries. Popular, Inc. hereby agrees to
furnish upon request to the Commission a copy of each instrument defining the rights of holders of senior and
subordinated debt of Popular, Inc., or of any of its consolidated subsidiaries.
162
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
POPULAR, INC.
(Registrant)
Date: May 10, 2024
By: /s/ Jorge J. García
Jorge J. García
Executive Vice President &
Chief Financial Officer
Date: May 10, 2024
By: /s/ Denissa M. Rodríguez
Denissa M. Rodríguez
Senior Vice President & Corporate Comptroller